Module 6 : Macroeconomics – Measurement, Growth &
Trade
6.1 Introduction
Major economic goals
1. Economic growth
2. Full employment
3. Economic efficiency
4. Price stability
5. Balanced trade
GDP Measurement
Circular flow model: diagram of how households and firms exchange factors of
production in domestic economy
Aggregate expenditures = aggregate income
National income method
Using GDP – value of all final goods/services produced
• Sum of incomes received for factors of production
• Adjusted by
o Adding indirect taxes
o Subtracting subsidies
o Adding depreciation (Capital Cost Allowance)
Personal income: income received by households before taxes
Disposable income: income after taxes
1. Consumption
2. Saving
GDP = (C+I+G+(X-M))
Consumption: includes all goods & services
• Nondurable goods: tangible items consumed in a short period of time
• Durable goods: longer-lasting consumer goods
Trade
6.1 Introduction
Major economic goals
1. Economic growth
2. Full employment
3. Economic efficiency
4. Price stability
5. Balanced trade
GDP Measurement
Circular flow model: diagram of how households and firms exchange factors of
production in domestic economy
Aggregate expenditures = aggregate income
National income method
Using GDP – value of all final goods/services produced
• Sum of incomes received for factors of production
• Adjusted by
o Adding indirect taxes
o Subtracting subsidies
o Adding depreciation (Capital Cost Allowance)
Personal income: income received by households before taxes
Disposable income: income after taxes
1. Consumption
2. Saving
GDP = (C+I+G+(X-M))
Consumption: includes all goods & services
• Nondurable goods: tangible items consumed in a short period of time
• Durable goods: longer-lasting consumer goods
