What flows from government to firms?
Households receive income from firms. They also receive money from the government (transfers) and must pay money to the government (taxes)
. Households spend some of their disposable income and save the rest.
What is real flow and money flow?
Real flows refer to the flow of the actual goods or services, while money flows refer to the payments for the services (wages, for example) or consumption payments
.
What are the major flows in a simple economy?
Simple economies can be described in terms of three major economic flows. These are:
income, spending and saving
.
What are the 4 sectors of the circular flow diagram?
Four sector model studies the circular flow in an open economy which comprises of the
household sector, business sector, government sector, and foreign sector
.
What is the economic circular flow of activity?
All market economies are characterized by a circular flow of economic activity. This means that
money and products (including the products businesses need to operate) move in a circular fashion between businesses and households
.
The government attempts to shape the business practices through both, directly and indirectly, implementing rules and regulations
. The government most often directly influences organizations by establishing regulations, laws, and rules that dictate what organizations can and cannot do.
The inner loop of the circular-flow diagram
represents the flows of goods and services between households and firms. The households sell the use of their labor, land, and capital to the firms in the markets for the factors of production.
Which of the following is the money flow that corresponds to the real flow of resources?
goods and services
.
The five-sector model consists of
(i) households (the public sector), (ii) businesses, (iii) government, (iv) the foreign sector, and (v) the financial sector
.
| Basis for Comparison Real Flow Money Flow | Use of money Exchange of goods and services without the use of money. Exchange of goods and services by using money. |
|---|
There are
two types
of circular flow. Real flow: The term real flow means the flow of factor services from households to firms. Similarly, the flow of goods and services from firms to households. Money flow: The money flow refers to the flow of factor payments from firms to households for factor services.
There are four basic macroeconomic sectors of an economy, namely,
household, business, government and foreign
. These sectors reflect four key macroeconomic functions and are responsible for four expenditures on gross domestic product (GDP). Each sector has a unique role to play in macroeconomic activity.
Sectors of Economy:
Primary, Secondary, Tertiary, Quaternary and Quinary
.
- 6.1 PRODUCTION. In the last lesson you have read about scarcity of resources and making choice. …
- 6.1.1 Land. Land is a gift of nature. …
- 6.1.2 Labour. …
- 6.1.3 Capital. …
- 6.1.4 Entrepreneurship. …
- 6.2 FACTOR INCOMES. …
- 6.3 CONSUMPTION. …
- 6.4 CAPITAL FORMATION.
To create employment opportunities initiating projects such as generation of electricity
. To prevent foreign dominance of the economy investing in areas where the locals are not able to. To redistribute wealth where returns are very high. To prevent establishment of monopolies.
Households are the main sources of the government
tax-revenue
. They are the main tax-payer. A household pays income tax, wealth tax, estate duty, gift tax etc. as direct taxes to the state.
In the basic (two-factor) circular flow model, money flows from households to businesses
as consumer expenditures in exchange for goods and services produced by the businesses, then flows back from businesses to households for the labor that individuals provide
.
