Interactive Economics resources for high school students, teachers, and everyone else
Unit 1 Topic 2: Economic Flows
On this page:
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Circular Flow of Income :: interactive calculator
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The Circular Flow of Income, Aggregate Demand and Government Intervention in Economic Cycles :: video explainer
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The Business Cycle :: interactive model
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Overview of Unit 1 Topic 2: Economic Flows :: video explainer
Circular Flow of Income :: interactive calculator
How to use the calculator:
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use the sliders to change the relative values for leakages, injections and consumption
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you can then determine the level of Aggregate Demand (AD), as well as whether the economy is in a blanked, contractionary, or expansionary phase.
Why is this stuff important to know?
Economies are in constant states of change. As economists, it's important that we can determine the level of cyclical economic activity. Understanding the changes in the level of AD in the economy helps decision-makers to make informed choices in regards to big decisions, such as:
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whether to invest in new capital for a business, or
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whether governments should increase or decrease expenditure.
There are lots of other informed decisions that households, firms and government may make when they have a clear understanding on the cyclical nature of the economy. What are some other examples?
The Circular Flow of Income, Aggregate Demand and Government Intervention in Economic Cycles
The Business Cycle :: interactive model
By now you likely have a good idea that economies work in cycles - expansion and contraction, peaks and troughs. And getting your head around economic cycles is REALLY important. Your studies in economics will be much easier when you can discern cyclical changes and structural changes in the economy. this is foundation stuff - so pay attention!
The interactive model below lets you to see what is happening to the levels of our 'big 3' economic indicators - GDP, inflation and unemployment - at each phase of the business (or economic) cycle.
Remember to click on the buttons to view government policy response at each phase, as well as read a bit about the Australian examples. Later on in unit 4 you take a deep dive into the data on economic cycles in the Australian economy, and government responses. Also remember to try the quiz, and importantly, write your own physical notes - writing helps build knowledge!