Your SlideShare is downloading. ×
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Dmydocspatricelourdescollegepowerpointsecon1thecircularflowofeconomicactivity 090331025031-phpapp01

3,072

Published on

Published in: Economy & Finance, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
3,072
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
97
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. THE CIRCULAR FLOW OF ECONOMIC ACTIVITY INTRODUCTORY MACROECONOMICS By: Cristobal M. Pagoso Rosemary P. Dinio George A. Villasis Prepared by: GREGAR DONAVEN E. VALDEHUEZA, MBA Lourdes College Instructor
  • 2. Basic Economic Activities
    • Production
        • The use of economic resources in the creation of goods and services for the satisfaction of human wants.
    • Consumption
        • The using up of goods and services by consumer purchasing or in the production of other goods.
    • Employment
        • The use of economic resources in production; engagement in activity
    • Income Generation
        • The production of maximum amount an individual can spend during a period without being any worse off.
  • 3. Two Economic Units
    • Household
        • The basic consuming unit.
    • Firm
        • The basic producing unit.
  • 4. Stock and Flow Variables
    • Flow
        • A quantity measured over a particular period of time.
    • Stock
        • A quantity measured as of a given point in time.
    • The concepts of stock and flow measurements are essential in understanding the economic variables of wealth and income.
      • Wealth
        • Anything of valued owned. It is a stock since it is what is owned at a particular time.
      • Income
        • The rate at which we earn money. It is a flow since income that is saved, increases the stock of wealth.
  • 5. Economic Model of Production
    • The Circular Flow of the Production Process
    HOUSEHOLDS ECONOMIC RESOURCES GOODS AND SERVICES PRODUCING UNITS
  • 6. Circular Flow of Goods Among Production Units FINAL GOOD FIRM RAW MATERIAL FIRM CONSUMERS INTERMEDIATE GOOD FIRM RAW MATERIALS FINAL GOODS INTERMEDIATE GOODS
  • 7. Interrelation Between Production Units & Households HOUSEHOLDS RESOURCES RESOURCES RESOURCES FINAL GOOD FIRM INTERMEDIATE GOOD FIRM RAW MATERIAL FIRM
  • 8. Economic Model of Income and Consumption
    • The Circular Flow of Goods and Income
    • Among Producers & Households
    HOUSEHOLDS INTERMEDIATE GOOD FIRM RAW MATERIAL FIRM MONEY PAYMENT FOR PURCHASE OF FINAL GOODS RESOURCES MONEY PAYMENT FOR RESOURCES RESOURCES MONEY PAYMENT FOR RESOURCES RESOURCES MONEY PAYMENT FOR RERESOURCES FINAL GOODS FINAL GOOD FIRM
  • 9. The Circular Flow of Income PURCHASES OF GOODS AND SERVICES INCOME FLOW OF WAGES, INTERESTS, RENTS HOUSEHOLDS PRODUCING UNITS
  • 10. Circular Flow of Income Among Production Units FINAL GOOD FIRM RAW MATERIALS FIRM MONEY PAYMENTS FOR INTERMEDIATE GOODS MONEY PAYMENTS FOR RAW MATERIALS INTERMEDIATE GOOD FIRM HOUSEHOLDS MONEY PAYMENTS FOR FINAL GOODS
  • 11. The Circular Flow of Output and Income
    • Circular Flow of Physical Goods and Money Income
    Goods and Services Factors of Production (land, labor, capital, entrepreneur) Payments of Factors (rent, wages, interest, profit) Payment of Purchase of goods and services. Household Sector Business Sector
  • 12. The Circular Flow of Goods & Income of Households & Firms with the Government & Foreign Countries GOVERNMENT HOUSEHOLDS PRODUCING UNITS FOREIGN COUNTRIES Income Payments of Wages, Rent, Dividends, & Interests Purchase of Goods & Services Economic Resources Taxes Taxes Wages, Transfer Payments Purchase of Goods & Services Goods & Services Money Payments for Imports Money Payments for Exports
  • 13. Implications of the Circular Flow of Economic Activity
    • The goods, resources, and money payments will flow as long as households continue to consume, and as long as firms continue to produce.
    • That since goods and resources flow in exchange for payments, the rate of payments flow will in the end be the same. Money is the inducing factor, and the pillar of the price system. Without it, there is no price system.
  • 14. Inflows and Outflows
    • Outflows (factors that decrease the level of economic activity)
        • Savings
        • Taxes
        • Imports
    • Inflows (factors that increase the level of economic activity)
        • Investment
        • Government Spending
        • Exports
  • 15. The Circular Flow of Economic Activity Reflecting The Outflows & The Inflows HOUSEHOLDS PRODUCING UNITS Income Payments of Wages, Rent, Dividends, & Interests Purchase of Goods & Services Economic Resources Goods & Services IMPORTS TAXES SAVINGS EXPORTS EXPENDITURES INVESTMENTS Foreign Countries Government Banks
  • 16.
    • Outflows are difficult to control because they are dependent on income. When income increases, we expect savings, taxes, and imports to increase.
    • Inflows are easier to manipulate. The proper use of policy enables the government to encourage exports and investments and to increase its expenditures when it desires to expand the flow of economic activity.
  • 17. Three Sets of Policy
    • Monetary policy
        • Affects the savings and investment.
    • Fiscal policy
        • Controls taxes and government expenditures.
    • Trade policy
        • Affects a country’s exports and imports.
  • 18. - THE END -
    • Any questions?
    • GOOD DAY!!! 

×