outflows and inflows (2)

7/27/2019 Outflows and Inflows (2)

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Outflows and Inflows of the

Circular Flow


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Circular F low

Common ly referred to as sets of

act iv i t ies that are taking p lace in the

econom ic system of our count ry.


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The Outf lows and I nf lows

In the economic system, we may have experienced

the decrease and increase of money supply in the

economy.

There are times that there are plenty of money and

sometimes, almost scarce or few.

These kinds of phenomena are brought about by the

Changes in the outflows and inflows in the

economic system.


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In Circular Flow ..

The household receives income from the

f irm. I t is assumed that the incomes

received by the households are all spent forconsumption, and goods and services are

all sold out.


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In Circular Flow ..

Not all incomes are spent. There are factors

that affect the individual consumer is not

to uti l ize his income.


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SAVINGS

The individual consumer tends to save for

future use. Usually, he deposits his savings

in the bank.

Savings is an income not spent for

consumption.

Savings represent a non-use of output.


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TAXES

It is compulsory contribution to support the

government.

Taxpayer, as good citizens, has theresponsibility to contribute a fair share to

the cost of the government

People pay their taxes in accordance withthe benefits they receive from the

government. It is like buying goods and

services in the market.


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IMPORTS

These are goods brought by the Philippines

from other countries.

The country resorts to importation if ouragriculture and industries cannot supply the

necessary goods that the consumers need.

No country can be completely selfsufficient.


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With the outflows taking place in theeconomy, we are bound to experience

recession.

Outf lows can be checked by bringing back

the funds into the circular f low and this can

be attained throughinvestment, government

expenditures and exports.


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I nvestment

It constitute a spending decision that results

in the use of output and productive

resources

Savings made by the depositors is invested

into business by the bank. This may be in

the form of business or lending the moneyto people who will likewise invest the

money.


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I nvestment

If investment equals the savings, then it

offsets the outflows caused by the savings

It is volatile because it is tied so closely to

the state of business confidence and to

expectations about the future performance

of the economy.


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Exports

Products purchased by the country from

other countries are reciprocated by foreign

countries by buying our products.

When the Philippines export goods to other

countries, payments are made and this

money goes back into the circular flow


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I nvestments, government

expenditures and exportsareinflows in our economy.

An INFLOWis a flow of income

that brings back funds into the

circular flow.


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When outflowsEQUAL theinflows, the level ofeconomic

f low is maintained.

Too much outf lows of moneyin

our economy wil l result toDEFLATION


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PRODUCER

Compete on the fewer pesos in thehands of the CONSUMERS

Drop in the price level and rise in the value of

pesos.


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DEFLATIONmay be described as plenty of

goods chasing after too few pesos.

Too much inflows of money into our economy usually

results to INFLATION, a decline in the value of money,

with an upward movement of the price level.


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When the amount of money in circulation increases, people

have more money to spend.

There will be an increase in demand.

Therefore, consumers compete for available goods.

They pay more pesos for the goods they want and

consequently , an increase in price.

INFLATIONthen can be described as too much pesos going

after a small number of goods


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Inflows and outflows will never

be equal. There will always be

imbalance between the two, andthe imbalance


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Outflows and inflows will never be equal.There will always be imbalance between the

two, and the imbalance can be checked by the

economic policies of the government.

The reasons for these imbalances are

CONSUMERS BEHAVIOR and INCOME


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Assignment : Essay Analysis

A. What are the effects of outflows andinflows in the Economic System of the

Philippines?

A. Cite examples of outflows and inflows in

our economy. Support your examples by

expounding it through explanation.


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Guidelines for the Essay

Analysis: It should be electronic copy.

Use calibri font style with 11 as font size

It should be double space.

Use short bond paper.

A minimum of 3 pages analysis and 5 pages

maximun. Deadline : August 2, 2011

Failure to submit means zero.


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REMINDER:

Be ready for a quiz next meeting

outflows and inflows (2)

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