经济学导论10.ppt

The Circular-Flow Diagram (p177 -178) The circular-flow diagram is a visual model of the economy that shows how income flow through markets among households and firms. The Circular-Flow Diagram Firms Produce and sell goods and services Hire and use factors of production Households Buy and consume goods and services Own and sell factors of production The Circular-Flow Diagram Markets for Goods and Services Firms sell Households buy Markets for Factors of Production Households sell Firms buy The Circular-Flow Diagram Factors of Production Inputs used to produce goods and services Land, labor, and capital The Circular Flow of Income Diagram p178 Simplified Circular Flow of Income (p178) It is a closed economy There is no government intervention There is no international trade This simple model is not realistic Households do not always spend all income received (saving) Firms do not pay out all their income (investment) Money entering the flow is called “Injection” (J) Money leaving the flow is called “Withdrawal” (W) Injection and Withdrawal (p179) Injection (J) Investment by firms ( I ) Government Spending (G) Exports ( E ) Withdrawal ( W ) Saving by household ( S ) Tax paid to the Government ( T ) Imports ( M ) Chapter 10 Circular Flow of Income 0 fig Income (Y) Consumption of domestically produced goods and services (C) The circular flow of income Firms Households Firms Households Market for Factors of Production Market for Goods and Services Spending Revenue Wages, rent, and profit Income Goods Services sold Goods Services bought Labor, land, and capital Inputs for production fig Consumption Spending (C) Withdrawal (W) Injection (J) Incomes (Y) A circular flow of income model (p179) fig Income (Y) Consumption of domestically produced goods and services (C) Investment (I) Government expenditure (G) Export expenditure (X) BANKS, etc Net saving (S) GOV. Net taxes (T) ABROAD Import expenditure (M) The circular flow of income (p183) WITHDRAWAL