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Economics 201 Circular Flow

by: Nicole LeBlanc

Economics 201 Circular Flow Eco 201

Marketplace > Alabama A&M University > Economics > Eco 201 > Economics 201 Circular Flow
Nicole LeBlanc
Alabama A&M University
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Economics, Circularflow




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This 2 page Class Notes was uploaded by Nicole LeBlanc on Thursday September 1, 2016. The Class Notes belongs to Eco 201 at Alabama A&M University taught by in Fall 2016. Since its upload, it has received 14 views. For similar materials see in Economics at Alabama A&M University.

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Date Created: 09/01/16
Nicole LeBlanc Assignment #2 Q1. Explain what a business cycle is. A. A business cycle is a period of activity where, over time, an economy can grow at a faster rate, a so-called ‘economic boom’, and then move into a period of slower growth, an economic recession. Q2. Briefly explain the meaning of the four key macroeconomic outputs. A. The four key macroeconomic outputs are Gross Domestic Product, inflation, unemployment, and the current account. GDP, is usually calculated on an annual basis, it can be calculated on a quarterly basis as well, Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Unemployment is the number of individuals seeking work, but that do not currently have a job. The current account is the difference between exported and imported goods and services. Q3: Discuss the circular flow of income. A: The circular flow of income or circular flowis a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. Q4: Explain the concepts of leakage from an injection into circular flow and provide one example for each. A: Leakages- Is money leaving that simple circular flow and does not directly go back to the Households. Examples of Leakages: Savings: Households saving a portion of their income which than allows the bank to give businesses/firms a loan. Injections- Is spending that is not dependent on the current level of income. Money that is received by firms that does not come directly from the households Examples of Injections : Investment Spending: Is when businesses buy capital goods funded by loans from the bank. Q5. What is total expenditure? A: The sum of the price paid for one or more products or services multiplied by the amount of each item purchased.


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