Tuesday

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 8 The Data of Macroeconomics

Chapter 23 of 36 Measuring A Nation’s Income

Section 4 of 15

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Figure 1 is a simplified circular flow diagram, it does not include taxes, savings, government purchases, and foreign trade and investment.

The actual economy is more complicated, see Figure 1A expanded diagram.

Households do not spend all of their income.

They pay some to the government in taxes.

They save some for future use as private savings.

Households do not buy all the goods and services.

Some goods and services are bought by government.

Some goods and services are bought by firms for production.

There are imported and exported goods and services and international financing.

The fundamental point is regardless of whether a household or other entity buys a good or service, the transaction always has a buyer and seller.

For the entire economy total expenditure always equals total income.

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imported goods and exported goods

yunyuu-hin to yushutsu-hin