EC202 1nd Edition Lecture 10Outline of Last Lecture I. Circular flowOutline of Current Lecture II. Circular flow continuedIII. Consumption IV. Investment spendingV. Government purchasesCurrent Lecture-circular flow-stock variable: a measure of an amount that exists at an instant of time-examples: wealth, debt, savings, accumulated snowfall, population-flow variable: a measure of a process that takes place over a period of time; a rate of change of some stock variable per unit of time-examples: output, spending, income, deficit, saving, rate snow is falling, population growth rate-the value of a flow depends on the length of the period of time that it is measured during-consumption: the value of all goods and services bought by households-durable goods: long lived-examples: furniture, cars-non-durable goods: shorter lived-examples: food, clothes-services: work done for consumersThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.-examples: hair cut, legal services, education-investment spending: spending, mainly by firms, primarily on newly produced capital goods and housing-business fixed investment: new machinery and factories-residential investment: new homes and apartments-inventory investment: change in business inventory-government purchases: purchases by federal, state, and local governments of final goods and services-transfer payments: payments made by the government in return for which no current goods or services are received -examples: social security payments and unemployment insurance
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