The Circular Flow and National Income Accounting

Note: the first time you go through each of these topics you should click on the following items in sequence. 

Read hypertext selection

Go to the lecture
Part "a"
Part "b"

Take a quick quiz 

Work a problem

Discuss an issue



The experiences of the Great Depression of the 1930s and World War II were associated with a revolution in economic thought, which at least for several decades shifted the attention of economists from how individual markets work to how the economy as a whole works. Before we look at that revolution in the next topic, we need some conceptual equipment which enables us to talk about the big aggregates, such as total output and total income in an economy. In this topic we develop some basic concepts everyone has to be familiar with in order to understand the important analytical and policy issues we'll be dealing with in the remainder of the course.


  • To make the transition from micro to macro economics
  • Establishing the logic of national (domestic) income accounting
  • Showing how index numbers can be used to deal with the problem of changing values of the monetary unit
  • Exploring the possibilities of moving beyond simple national income accounting to more comprehensive measures of wellbeing.

Copyright 2001 K.J. Rea