Chea Sim University of Kamchay Mear Faculty of Management Prepared By : Mr Len Soklyn - 1 - Macroeconomics CIRCULAR FLOW OF ECONOMIC ACTIVITY What is economic ? Economics: The study of how human being coordinates their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society. - Microeconomics: The study of individual choice, and how that choice is influenced by economic force – The necessary reactions to scarcity. - Macroeconomic: The study of the economy as a whole, which include inflation, unemployment, business cycle, and growth. 1-1 The Simple Circular Flow of economic Activity Circular Flow model is a macroeconomic model that emphasizes the continues flow of goods and services through the production and consumption process. A- Structure of simple economy - Households - Firms - Product Market: market where goods and services are offered for sales. - Factor Market: market where productive resources are bought and sold. B. Stocks, Flows and Consumption - Stock is the amount of the factor of production available at a point in time. - Flow is use of a factor of production during the production process.