Page 65 - Macroeconomics. book docx_Neat
P. 65
6
Chapter
The Circular Flow of Economic Activities
Chapter Objectives
At the end of this chapter, students should be able to:
Understand the concept of the circular flow of economic activities.
Identify the main sectors involved in the economy: households, firms, government, and
the foreign sector.
Explain how income, goods, services, and payments move between different sectors.
Distinguish between leakages and injections in the circular flow model.
Analyze the role of government and the foreign sector in macroeconomic activity.
Understand how saving, investment, taxes, government spending, exports, and imports
affect national income.
Use the circular flow model to explain basic macroeconomic relationships.
Key Terminology
Circular Flow of Income
A model that shows how money, goods, services, and income move continuously
between different sectors of the economy.
65
