LECTURE NOTES
LECTURER:
Cecily Moyo
MODULE
ECS 1601
Shop U21, Stoneridge Centre, 1 Stoneridge Drive, Greenstone Park, Edenvale, Johannesburg, 1610
Postnet Suite #448, Private Bag x10010, Edenvale, 1610 • www.ebs.co.za • Company Registration 2012/018470/0
, 1
TABLE OF CONTENTS
Study Unit Text book Topic
SU 1 Ch 3 Production, income and spending in a mixed
economy
SU 2 Ch 14 The Monetary Sector
SU 3 Ch 15 The Government Sector
SU 4 Ch 16 The Foreign Sector
SU 5 Ch 13 Measuring the Performance of the
Economy
SU 6 Ch 17 A simple Keynesian Model of the Economy
SU 7 Ch 18 Keynesian Models including Government
And the Foreign Sector
SU 8 Ch 19 More on Macroeconomic Theory and
Policy (the AD and AS Model)
SU 9 Ch 20 Inflation
SU 10 Ch 21 Unemployment
SU 11 Ch 22 Economic Growth and Business Cycles
ECS 1601
Lecture Notes
Cecily Moyo
, 2
Study Unit 1
Production, income and spending in the mixed economy
The three vital flows in a mixed economy include:
• Production
• Income
• Spending
The major sources of production (factors of production) – natural resources, labour, capital and
entrepreneurship
The income of sources of production – rent, wages or salaries, interest and profit
The dominant sources of spending in the economy – households, firms, governent and foreign
sector
The interdependence of the main sectors - include the flows, markets and spending forces of the
economy
Introduction
When dealing with macroeconomics it requires a mental shift from microeconomics. In
macroeconomics, you look at the economy as a whole; a complete entity.
Production, Income and Spending
Production is of fundamental concern to economists. Production does not take place for the sake of
production alone. The purpose of production is to satisfy consumers’ demands.
The economic process is as follows:
• Households own the factors of production
• Firms use factors of production (scarce resources) to produce goods and services
• Firms pay income (returns on factors of production) to the households for the factors of production
• Households use the income to spend on goods and services.
The three major flows in the economy
ECS 1601
Lecture Notes
Cecily Moyo
, 3
Production generates income (for the various factors of production) and part or all of this income is
then spent to buy the available goods and services. All these things are happening at the same time.
The main participants of a modern mixed economy are:
• Households
• Firms
• Government
• Foreign sector
They all spend, and therefore, they all earn an income. This income is then exchanged for goods
and services.
Exchange is the term economists use to explain what happens in the market place, either in the
goods and services market or the factor market.
Production, income and spending all constitute flows therefore we must differentiate between
flows and stocks to place each term in perspective.
Stock and flow variables (stocks and flows):
A stock has no time dimension and can only be measured at a specific moment. When a
shopkeeper takes stock, s/he counts all the goods in the shop at that particular time. A flow has a
time dimension and can only be measured over a period. When a shopkeeper calculates her/his
sales, profit or loss, the calculation is done for a period such as 6 months.
Examples of stock concepts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .
....................................................................................
................................................................................ ....
Examples of Flow concepts:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
............................................................... .....................
............................................................... .....................
ECS 1601
Lecture Notes
Cecily Moyo
LECTURER:
Cecily Moyo
MODULE
ECS 1601
Shop U21, Stoneridge Centre, 1 Stoneridge Drive, Greenstone Park, Edenvale, Johannesburg, 1610
Postnet Suite #448, Private Bag x10010, Edenvale, 1610 • www.ebs.co.za • Company Registration 2012/018470/0
, 1
TABLE OF CONTENTS
Study Unit Text book Topic
SU 1 Ch 3 Production, income and spending in a mixed
economy
SU 2 Ch 14 The Monetary Sector
SU 3 Ch 15 The Government Sector
SU 4 Ch 16 The Foreign Sector
SU 5 Ch 13 Measuring the Performance of the
Economy
SU 6 Ch 17 A simple Keynesian Model of the Economy
SU 7 Ch 18 Keynesian Models including Government
And the Foreign Sector
SU 8 Ch 19 More on Macroeconomic Theory and
Policy (the AD and AS Model)
SU 9 Ch 20 Inflation
SU 10 Ch 21 Unemployment
SU 11 Ch 22 Economic Growth and Business Cycles
ECS 1601
Lecture Notes
Cecily Moyo
, 2
Study Unit 1
Production, income and spending in the mixed economy
The three vital flows in a mixed economy include:
• Production
• Income
• Spending
The major sources of production (factors of production) – natural resources, labour, capital and
entrepreneurship
The income of sources of production – rent, wages or salaries, interest and profit
The dominant sources of spending in the economy – households, firms, governent and foreign
sector
The interdependence of the main sectors - include the flows, markets and spending forces of the
economy
Introduction
When dealing with macroeconomics it requires a mental shift from microeconomics. In
macroeconomics, you look at the economy as a whole; a complete entity.
Production, Income and Spending
Production is of fundamental concern to economists. Production does not take place for the sake of
production alone. The purpose of production is to satisfy consumers’ demands.
The economic process is as follows:
• Households own the factors of production
• Firms use factors of production (scarce resources) to produce goods and services
• Firms pay income (returns on factors of production) to the households for the factors of production
• Households use the income to spend on goods and services.
The three major flows in the economy
ECS 1601
Lecture Notes
Cecily Moyo
, 3
Production generates income (for the various factors of production) and part or all of this income is
then spent to buy the available goods and services. All these things are happening at the same time.
The main participants of a modern mixed economy are:
• Households
• Firms
• Government
• Foreign sector
They all spend, and therefore, they all earn an income. This income is then exchanged for goods
and services.
Exchange is the term economists use to explain what happens in the market place, either in the
goods and services market or the factor market.
Production, income and spending all constitute flows therefore we must differentiate between
flows and stocks to place each term in perspective.
Stock and flow variables (stocks and flows):
A stock has no time dimension and can only be measured at a specific moment. When a
shopkeeper takes stock, s/he counts all the goods in the shop at that particular time. A flow has a
time dimension and can only be measured over a period. When a shopkeeper calculates her/his
sales, profit or loss, the calculation is done for a period such as 6 months.
Examples of stock concepts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .
....................................................................................
................................................................................ ....
Examples of Flow concepts:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
............................................................... .....................
............................................................... .....................
ECS 1601
Lecture Notes
Cecily Moyo
