hi everyone we have understood the macroeconomic objectives of government but now to actually understand how they can be targeted we need to find out how they're measured so let's take growth perhaps the most fundamental macro objective of all governments and let's understand how we can gain a measure of growth before we look adapt though we need to understand what the economy is how can we decide whether an economy is growing you wouldn't actually know what the economy is in the first place so the circular flow of income helps us get an understanding of the economy it models the economy for us and from this model we can gain three different types of measurement of growth so let's start off by looking at households and firms two economic agents that exist in the economy households provide their services to firms in the form of labor and in the form on entrepreneurship and as a result they gain rewards they gain in comes out of it the incomes then go to households also receive this and this spend that income on goods and services produced by firms right well that's one measure of the secular flow of money flowing around the economy it originated from firms when actually workers are hired and those workers spend on money okay really really simple to sector to agents in truth the economy is much more complex than that we've got the government we need to include the government spends money as well the government taxes people we also need to consider the rest of the world we trade them with money enters our country by exports and also money leaves the country by impulse there are lots of different ways in which money can enter that we've not looked at here and there are also different ways that men can leave the economy that we've not looked at so we need to open it up this morning now I consider four sectors bringing the government bring in the global economy so yes there is Consumer Expenditure yes okay households consumers basic people you and I we receive income we spend that in but there are other types of spending is one in the economy governments spend money there is government spending known as G these letters are very important to learn the letters as well they're spending by firms in the economy which is known as investment capital I other is also spending my foreigners when they purchase our goods and services there is export so we sell all goods abroad money comes in and that's export revenue so yes you've got all these three different types of expenditure as well and all these three things will lead to more money coming into the economy money entering the circular flow they are called injections so on top of consumer spending or other types of spending where money is injected into the circular flow so make sure you know those but at the same time we've assumed in this basic model that all of our income is spent well definitely not some of it actually leaves the cycler flow some of it we don't spend some of it we st. them so savings known as s some of it is taxed there is a governor from a government taxes a lot taxation t some of it leaves final taxation and some of it is spent on goods overall and that's known as spending on imports when we buy goods from abroad and all of these three things either money is leaving the country leaving the circuit flow or it's just not in spent in which case it exits the circular flow so these things are all known as the leak it is from the sake of the flow where money can leave the economy leave this flow of income and spending so you need to know we've got injections is very important to understanding leakages here which are also on top of expenditure consumer expenditures in the economy so consumer expenditure is not an injection it's an actual part of the flow whereas these three things are external which is why they're injections all you need to know here is what how can we kind of growth well if injections sabji plus i because alex is more or more than leakages s plus t percent there will be economic growth in the economy whereas if leakages were more than injections there will be a fall in growth in the economy right that's known as short-term growth the actual size of this flow can also increase if there are more households if and the quality of the labor increased so basically if the quantity and quality of a factors of production increase then the size of this flow can increase as well and that will be long-term growth which we're going to get into later on but very basically this is the circular flow into actions the linkages for ejections of all the linkages we see growth make sure that is very well see you next time thank you