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Circular flow of income and the circular economy - Coggle Diagram
Circular flow of income and the circular economy
Circular flow of income
Limitations
The model can reproduce itself indefinitely and perpetually
Ignores the linear throughput of matter and energy that powers the systems production of goods and services
The economy intrinsically requires natural resources and creates waste, and this waste must be absorbed somehow
Importance
If leakages = injections then economy stays the same
Circularity signifies interdependence of each activity
Unending nature of economic activities
simplified picture to understanding our economy
Firms buy workers times (wages) and employ other FOPS (paying returns) in order to sell goods and services to households
Households buy goods and services from firms and sell their time as labour to firms
Injections - Investment, government expenditure and exports
Withdrawals - Savings, taxes, imports
The circular economy
Problems to solve
should we recycle and reuse items or reduce consumption?
What government policies should we use?
Taxation