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    Week5-6: Circular Flow & Quantitative Elements

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    Mmapontsho Tshabalala
    The document discusses the circular flow model, which is a simplification used to understand the level of economic activity in an economy. It describes how there is a continuous flow of goods, services, and money between consumers (households) and producers (businesses/firms) in the economy. The main participants in the circular flow model are households, businesses, the public sector, and the foreign sector. Households consume goods and services, businesses employ factors of production to produce goods and services to sell for a profit, the public sector includes all levels of government, and the foreign sector represents other countries.

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    Week5-6: Circular Flow & Quantitative Elements

    Uploaded by

    Mmapontsho Tshabalala
    571 views4 pages
    The document discusses the circular flow model, which is a simplification used to understand the level of economic activity in an economy. It describes how there is a continuous flow of goods, services, and money between consumers (households) and producers (businesses/firms) in the economy. The main participants in the circular flow model are households, businesses, the public sector, and the foreign sector. Households consume goods and services, businesses employ factors of production to produce goods and services to sell for a profit, the public sector includes all levels of government, and the foreign sector represents other countries.

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    week 5-6

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    The document discusses the circular flow model, which is a simplification used to understand the level of economic activity in an economy. It describes how there is a continuous flow of goods, services, and money between consumers (households) and producers (businesses/firms) in the economy. The main participants in the circular flow model are households, businesses, the public sector, and the foreign sector. Households consume goods and services, businesses employ factors of production to produce goods and services to sell for a profit, the public sector includes all levels of government, and the foreign sector represents other countries.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    571 views4 pages

    Week5-6: Circular Flow & Quantitative Elements

    Uploaded by

    Mmapontsho Tshabalala
    The document discusses the circular flow model, which is a simplification used to understand the level of economic activity in an economy. It describes how there is a continuous flow of goods, services, and money between consumers (households) and producers (businesses/firms) in the economy. The main participants in the circular flow model are households, businesses, the public sector, and the foreign sector. Households consume goods and services, businesses employ factors of production to produce goods and services to sell for a profit, the public sector includes all levels of government, and the foreign sector represents other countries.

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    © All Rights Reserved
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    WEEK5-6: CIRCULAR FLOW & QUANTITATIVE ELEMENTS

    Circular flow of income and expenditure is a continuous


    movement of goods and services and money between the
    consumers and the producers in the economy

    An economy is a complex system and it is impossible to model or


    even describe all the different forces that impact on the level of
    economic activity.

    To understand what determines the level of economic activity we


    must simplify things by concentrating on the most important
    forces that shape our economy.

    The circular flow model is such a simplification.

    Circular Flow Diagram

    Circular Flow cont


    The main participants

    The main participants in the circular flow model are households, business
    enterprises (also called firms), the public sector and the foreign sector:

    Households are all the people who live together and who make joint
    economic decisions. Your family is a household; a person who lives on
    his/her own is a household. A commune of friends who live in one house
    and who share their expenses is also a household.

    Business enterprises or firms are the units that employ the factors of
    production to produce the goods and services that are sold on the goods
    market. An important aim of a business is to make a profit through selling
    goods and services. There are many different forms of businesses, such as
    sole proprietors, partnerships and private and public companies.

    Circular Flow Cont

    Public sector is a broad term that includes all aspects of local,


    regional (or provincial) and national government and everything
    that is owned by government as the representative of the people.

    The foreign sector consists of all the countries in the rest of the
    world. It includes the international institutions that govern the
    flow of goods and services and the flow of funds between
    different countries.

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