Measuring national income, the circular flow, GDP and GNI, real versus nominal, and an introduction to aggregate demand and supply.
The circular flow of income
In a simple economy, households supply factors to firms and receive income; firms produce output that households buy. The flow of income equals the flow of output equals the flow of expenditure. Injections (investment, government spending, exports) add to the flow; withdrawals/leakages (saving, taxation, imports) take out of it. The economy is in equilibrium when injections = withdrawals (J = W).
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