Answer to Question #220025 in Macroeconomics for Consolate

Question

How do the macroeconomics indicators link with the circular flow, individually?

Answer 1

The macroeconomic indicators consist of factors like the GDP, interest rates, fiscal policy and the consumer price index. These factors are directly linked to the circular flow as they affect how money moves in the economy. An increase in GDP means that there will be more money in circulation thus the circular flow will increase while a decrease in GDP causes the circular flow to reduce. Fiscal policy measures like an increase in government spending and reduction in taxes increases the circular flow while the fiscal policy measures like reduced government spending and increase in taxes reduces the circular flow. Finally, an increase in the interest rates reduces the circular flow while reduction in interest rates increases the circular flow.