Introduction
Topic: The circular flow
what is circular flow? Continuous flow of spending, production and income between different sectors.
The circular-flow model of an open economy shows the workings of an economy that is open to foreign trade.
Task
what are the 4s participants?
household-Households are the major consumers of economic goods and services – they use their income to buy from firms.
businesses/firm-Firms purchase the factors of production from the household in the factor market
public sector-This refers to local, regional and national government. • The state provides the households and businesses with public goods and services. • The state receives taxes from households, e.g. income tax.
foreign sector-There is a flow of goods or imports that flow from the foreign sector and are paid for by the individual households, businesses and the public sector.
Process
https://www.google.com/url?sa=i&url=https%3A%2F%2Feconclassroom.com%2Fthe-circular-flow-model-of-a-market-economy%2F&psig=AOvVaw3fVwRuN6zLsBSEB7mzE9VV&ust=1621690677624000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCICA1sTs2vACFQAAAAAdAAAAABAO
how Interaction between participants happen.
Households provide production factors to producers (firms). • Households receive an income (Y) in return – rent, wages, interest and profits.
• Households purchase goods and services from firms. • Firms receive income from sales revenue. • Households and firm
s purchase goods and services from the foreign sector as imports (M).
• The foreign businesses receive money from firms and households. • Firms sell goods and services to the foreign sectors, and this is called exports (X).
• Households and firms pay taxes to the government. (T) • The government provides public goods and services to households and firms.
Evaluation
1. List the four participants that influence the flows of production, income and expenditure. (8)
2. Explain what is meant by the term household in economics. (4)
3. Explain what you understand by the term leakage in economics (4 )
4.Explain what you understand by the term injection in economics. (4)
5. Explain what is meant by the economic term aggregation? (4)
6. Name the two parts of the financial market?. (4)
rubric
https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.scribd.com%2Fdocument%2F455159115%2FRubric-Protein-Synthesis-Flow-Chart&psig=AOvVaw2SnTBiDUAnLRywlQIxpkP7&ust=1621690530838000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCPiupoXs2vACFQAAAAAdAAAAABAD
Conclusion
for more information
The above circular flow diagram in Figure is one simple model of the economy. It dispenses with details that, for some purposes, are significant.
A more complex and realistic circular-flow model would include, for instance, the roles of government and international trade.
Yet these details are not crucial for a basic understanding of how the economy is organized.
Because of its simplicity, this circular flow diagram is useful to keep in mind when thinking about how the pieces of the economy fit together.
Credits
references