circular flow
Post on 20-Jun-2015
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The Circular Flow of Income
The Circular Flow of Income
FIRMS(suppliers of goods and services,
demanders of factor services)
HOUSEHOLDS(demanders of goods and services,
suppliers of factor services)
Q1
P1
QF2
PF2
Q2
P2PF1
QF1
D2D2
P
Q
P
Q
££ ££
££££
Factorservices
Goods
GoodsFactor
services
S S
D1 D1
(1)Consumer
demand
(1)Consumer
demand
(4)Factor supply
(4)Factor supply
(3)Factor
demand
(3)Factor
demand
(2)Producer
supply
(2)Producer
supply
OO
Factorpayments
Factorpayments
Consumption ofdomestically
produced goodsand services (Cd)
Consumption ofdomestically
produced goodsand services (Cd)
The circular flow of incomeThe circular flow of income
Firms
Households
Factorpayments
Factorpayments
Consumption ofdomestically
produced goodsand services (Cd)
Consumption ofdomestically
produced goodsand services (Cd)
Investment (I)Investment (I)
Governmentexpenditure (G)
Governmentexpenditure (G)
Exportexpenditure (X)
Exportexpenditure (X)
BANKS, etc
Netsaving (S)
Netsaving (S)
GOV.
Nettaxes (T)
Nettaxes (T)
ABROAD
Importexpenditure (M)
Importexpenditure (M)
The circular flow of incomeThe circular flow of income
WITHDRAWALS
INJECTIONS
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