7.1

Question 1

Macroeconomic theory

Answer 1

…
- emphasizes the roles of the state in influencing aggregate demand for the production of goods and services.

Question 2

National income

Answer 2

• flow of new output produced by economy
• interchangeable with national output
• To produce national output economy must posess stock of factors of production

Question 3

National capital stock

Answer 3

• stock of capital goods an economy has accumulated over time
• ## part of stock of national wealth

Question 4

Circular flow of income

Answer 4

• Basic purpose is to understand how money moves within an economy
• used to measure a a nation’s income
• Gov calculates its gross national income by tracking all of these injections into the circular flow of income and the withdrawals from it
• Closed economy: no international trade. All income recieved by households spent on consumption
• Open economy: economy open to international trade

Question 5

Injections and leakages/withdrawals

Answer 5

• sum of government spending (G), exports (X), and investments (I)
• sum of taxation (T), imports (M), and savings (S)
• When G + X + I is greater than T + M + S, the level of national income (GDP) will increase.