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The circular flow of income, Leakages, Firms, Financial Sector, Government…
The circular flow of income
Leakages
Households
They provide the factors of production
Labour
Capital
Land
Entrepeneurship
Savings (s) = Financial Market
Taxes (T) = Government
Imports (M) = Foreign Market
Firms
Factors of payment
Land = Rent
Labour = wages
Capital = Interests
Entrepreneurship = Profits
Injections
Investment (I)
Government spending (G)
Export (X)
Return on investment (R)
Provide goods and services
Financial Sector
Broad range of industries
Households save their income
Firms take loans to make investments and grow their business
Government sector
Goverment spending
Minimise inequality
Protection of the environment
Reduce market failure
Posible Inflation
Provide public goods
Raises taxes
Potential Higher economy growth
Regulate labour markets
National defense
Foreign Market
Households and other sectors are interdependent
Households are dependent on foreign producers to provide them with imports they don't have, that are better and less expensive
The income of the foreign producers are dependent the ability of the country's households and firms to buy their product