Economics 1022A/B Study Guide - Potential Output, Loanable Funds, Industrial Revolution

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ECON 1022A/B Full Course Notes
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ECON 1022A/B Full Course Notes
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The circular flow of income: closed, ungoverned, spendthrift 2 sector model (refer to diagram 1) There are four main areas of concern: the level of output, employment, prices, the foreign sector. There is a need to maintain a high level of output and also to maintain a steady growth of this output. This output has to be measured in terms of the value of all the goods and services that are produced, this is called gross domestic product (gdp). The value of gdp fluctuates over time due to the business cycle. (refer to diagram 5) This represents the possible combinations of goods and services which can be produced when all the factors of production in the economy are fully employed. It can be measured as a certain level of real. Gdp or recognized as a point on the country"s production possibility frontier (ppf). (refer to diagram 6)

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