Notes 5’’’’. A more complete circular flow model FirmsHouseholds Goods mkt. Factor mkt....
7
Notes 5’’’’. A more complete circular flow model Firms Households Goods mkt. Factor mkt. . Our original, simple model Nominal (money) flows only
-
Upload
ashlee-stewart -
Category
Documents
-
view
213 -
download
1
Transcript of Notes 5’’’’. A more complete circular flow model FirmsHouseholds Goods mkt. Factor mkt....
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
1. Our original, simple modelNominal (money) flows only
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
Government
ForeignSector
2. Let’s add the Government & Foreign Sectors
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
Loanable Fundsmkt.
Saving (S)Borrowing
for investment
Government
ForeignSector
3. Let households save &business firms borrow & invest
Foreign Direct Investment
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
Loanable Fundsmkt.
Saving (S)Borrowing
for investment
Government
Taxes (T)
Borrowing to cover budget deficit*
ForeignSector
Foreign Direct Investment
*Assumes a government budget deficit. In the event of a surplus, the flow is reversed.
4. The government taketh away . . .
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
Loanable Fundsmkt.
Saving (S)Borrowing
for investment
Government
Taxes (T)
Borrowing to cover budget deficit*
Gov’t. Purchases (G)
ForeignSector
Foreign Direct Investment
Subsidies
Transfer Payments
Gov’t. Purchases (G)
5. . . . and giveth back
*Assumes a government budget deficit. In the event of a surplus, the flow is reversed.
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
Loanable Fundsmkt.
Saving (S)Borrowing
for investment
Government
Taxes (T)
Borrowing to cover budget deficit*
Gov’t. Purchases (G)
ForeignSector
Foreign Direct Investment
Subsidies
Transfer Payments
Gov’t. Purchases (G)
Exports (X)
Imp
ort
s (M
)
6. Foreign trade . . .
*Assumes a government budget deficit. In the event of a surplus, the flow is reversed.
Notes 5’’’’. A more complete circular flow model
Firms Households
Goods mkt.
Factor mkt.
Loanable Fundsmkt.
Saving (S)Borrowing
for investment
Government
Taxes (T)
Borrowing to cover budget deficit*
Gov’t. Purchases (G)
ForeignSector
Foreign Direct Investment
Subsidies
Transfer Payments
Gov’t. Purchases (G)
Borrowing from foreign sector*
Exports (X)
Imp
ort
s (M
)
Investment
*Assumes government budget deficits and trade deficits. In the event of surpluses, the flows are reversed.
7. . . . and capital flows completethe picture
