ECO 1102 Chapter Notes - Chapter 5: Factor Cost, Circulatory System, Income Approach

• School: University of Ottawa
• Department: Economics
• Course: ECO 1102
• Professor: All

Document Summary

* circular flow model gives basic structure of macroeconomy. * this distinction not made explicitly in the text. * gives the structure, or the skeleton, of the macroeconomy. * the textbook gives a simple version, which is fine with me. * a flow quantity is an amount per unit of time, like a current of water passing through. * a stock is an amount observed at a point in time, like the volume of water in a tank. * value of stock at time t = value of stock at time t - 1 + value of inflow - value of outflow. * leakages and injections are both flow quantities. * an injection is any addition to the circular flow. * a leakage is any withdrawal (drainage) from the circular flow. * flows of expenditures and incomes circulating through the markets that comprise the macroeconomy. * analogous to the cardio-vascular system of blood circulating through the human body.