- _____ economics looks at the big picture, at what things like
income, __________, unemployment and inflation look like after
we added everything up.
- The circular flow model shows the real and ________ flows between
households and firms. It can be enhanced to account for interactions
with the government sector and _______ _________. Leakages out
of and __________ into this circle always balance. At the core
of this 'model' is the identity between income and output on the
one hand, and between ________ and output on the other.
- Output, income and spending all measure the same thing. Depending
on whether we define a country by its geographic boundaries or
by its residents, the empirical counterpart of these concepts
is _______ _________ ________ or _______ _________ _________.
- The central bank is the arm of the government responsible for
__________ policy. If the central bank provides the economy with
more money, this _______ nominal income, which is defined as the
price level times real income. Only economic analysis (to be provided
in later chapters) will reveal under what circumstances it is
more likely for the price level to rise or for real income to
- The national income accounts reveal who buys aggregate ________
and how aggregate income is spent.
- The __________ budget records the interaction between the private
sector and the government sector. It also reveals how the government
finances budget surpluses or ________.
- The ________ _____ _________ records the interaction with the
rest of the world. It also reveals how imbalances in the trade
of goods and ________ are being financed.
- Economists work with simplified pictures of the world which
they call ________. ________ are instrumental in understanding
the key economic issues in today's world.