Introduction to Macro Economics

Topic I: The Circular Flow of National Income and Product

1. explain the linkage between households and firms by using the concept of income and expenditures.
2. explain the equality of national income and national product.
3. explain and differentiate between equilibrium and disequilibrium.
4. define and explain aggregate supply and aggregate demand.
5. explain the circular flow of income and product.
6. define and differentiate between stock and flow.
7. explain using the circular flow how the U.S. economy is linked to foreign economies.

KNOW THE FOLLOWING TERMS:

KEY CONCEPTUAL QUESTIONS

1. Why does national income equal national product?
2. How is the U.S. economy linked with the rest of the world? Use the circular flow model to answer.
3. What happens to the economy when planned production exceeds planned expenditures?