...Part B Question 1 Figure 1 The circular flow of income (Figure 1) shows connections between different sectors of our economic system. It revolves around flows of goods and services and factors of production between firms and households. Businesses produce goods and services and in the process of doing so, incomes are generated for factors of production such as wages and salaries going to people in work. Injections: The three injections -- investment, government purchases and export. These injection expenditures, like consumption, are used to purchase aggregate production through the product markets. Most importantly, injections add to the total volume of the basic circular flow. That is, they "inject" revenue into the product markets that is used for factor payments and becomes household income. Withdrawals are increases in savings, taxes or imports so reducing the circular flow of income and leading to a multiplied contraction of production (output). (1) Investment (I), Capital spending by firms - e.g. on new technology (2) Government (G), Government expenditure - e.g. on the NHS or defense (3) Export (X), e.g. Overseas consumers buying goods and service Leakages: The three leakages -- saving, taxes, and imports. These leakages, like consumption, are how the household sector divides up or uses its income. Most importantly, leakages subtract from the total volume of the basic circular flow. That is, they "leak" income away from the product markets, making...
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...Head: THE IMPORTANCE OF ECONOMICS AND THE The Importance of Economics and the Understanding of the Circular Flow Model and its Place in Society ******* *************** Abstract Economics as a whole is a tool for understanding and studying production, distribution, and consumption of goods and services. Economics is concerned with the resourcefulness of scares resources with an optimum contentment of economic wants. Human beings are not only impacted by economics, but they are also considered to be a scarce resource in the way of labor power. Because humans are both the moving force of Economics and a resource behind Economics, the impact to society that Economics has is inevitably strong. With economics we, as a people, function in a trade system that is self sustaining and self regulation with minimal government interference. The intent of this paper is to show how Economics impacts society through the cyclical system that is designed by nature to evolve with the changes in demands of the time. Introduction No matter where you are from or where you go, Economics is a factor that will impact you and your well being. Economics is from the Greek word οίκος [oikos], meaning 'family, household, estate', and the word νομος [nomos], meaning 'custom, law', hence "household management" and "management of the state". Economics is a social science that typically studies the production, distribution, and consumption of goods and services. Economics is a social science,...
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...Macro Economy Systems Macroeconomics AIU Online Abstract In the following paper, I will be discussing the open and closed system of the two circular diagram presented in my textbook. I will explain what a closed system and open system is and provide examples for the both. Next, I will discuss the inner and outer flows of both systems. Then I will define the leakage and injections in an open system. Lastly, I will provide personal examples of the leakage and injection and describe and explain them both. Following the end of this paper, the reader should have a better understanding of and open and closed flows in the macro-economy. Macro Economy Systems It is very imperative that one understands the flows in the macro-economy. There are two flows: an open and a closed flow. In this paper I will be discussing and explain the two types of flows and how they affect the business world. By having this valuable information, consumers will now be aware of how their money is affecting the economic system in a certain way. Closed System A closed system is an economic system model that counts only domestic exchanges but not the foreign agents . This means that in a closed system, the money is built up inside a circular flow. In a closed system, there aren’t any leaks because there aren’t any foreign agents, governments, investments, or system of savings. Also there are not taxes, savings, or extra expenses that aren’t generated back into the economy. An example of a closed...
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...University of Phoenix Material Macroeconomic Terms Define the following terms in your words. |Term |Definition |Definition Source | |Gross Domestic |Gross Domestic Product |http://www.investopedia.com/terms/g/gdp.asp | |Product (GDP) |(GDP) is a way to measure| | | |how well a nation’s |Goss Domestic Product - GDP | | |economy is doing. This is| | | |the value of money after | | | |the goods and services | | | |are calculated during a | | | |certain time. | | |Real GDP |Real GDP is the whole |http://www.diffen.com/difference/Nominal_GDP_vs_Real_GDP...
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...Running Head: Macroeconomics Jaque Mcilwain August 9, 2012 Morales Macroeconomics Class Thursday 6pm Abstract I will be discussing the two types of circular flow diagrams: One that represents the flows in the macro-economy as closed system and one that represents the flow as an open system. Circular Flow Diagrams. Circular flow diagrams are an economic model that illustrates the way a countries money flows or the way a country operates. There are two different kinds of flow charts and they are classified as an open system and a closed system. An open economy is basically a country that is completely reliant on and influenced by other countries and their economies. In other words most of their flow of money is based on what other countries are doing to generate income and operates off how the other countries money flow through the economy. A closed economy is self-reliant and is not influenced by what goes on in other countries or by what goes on outside of their economy. In other words this economy relies on itself when taking into account about the way money flows. An example of an open economy is really the world by default. If any nation trades with another country then they are known as an open economy by default. The United States and Great Britain are great examples of an open economy because they are highly dependent upon importation and exportation of goods and the industry. An example of a closed economy would be North Korea an enemy of the United States...
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...02. ECONOMIC SYSTEMS – DEFINITIONS AND CHARACTERISTICS - CAPITAL ECONOMY – SOCIALIST ECONOMY – MIXED ECONOMY C. ECONOMIC SYSTEMS i) Circular Flow of Goods and Money in an Economic System Every economy is a system in which the production of many goods is organized to satisfy many wants of human beings. In an economic system, the two economic units namely households and enterprises are linked by a circular pattern of economic activities as illustrated in Figure 1.1.The choices and decisions of these two main units are the deriving forces of economic activity. Money Payments for Consumer Goods and Services Consumer Goods and Services-Food, Clothing etc (Output of Business Sector) HOUSEHOLDS 1) Consume final goods and services produced by business sector. 2) Provide inputs (labour and BUSINESSES OR ENTERPRISES 1) Provide goods and services to consumers. 2) Use resources (inputs) provided by households. capital) to business firms. Economic resources–land, labour and capital (inputs of business sector) Money: Payments Goods, Services, Resources and Money Salaries, in a Simpleand Profit Figure The flow of for Resources-Rent, Wage and Payments Interest Economy Fig. 1.1: The Flow of Goods, Services, Resources and Money Payments in a Simple Economy. In their households, people make two sets of decisions: a) selling the inputs they own, primarily their labour and b) buying goods with their incomes. The enterprises or businesses engage in production, using the labour and other inputs...
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...Economic Assessment: Outcome 2 &3 [Pick the date] 1a).What is Gross Domestic Product? GDP stands for Gross Domestic Product. GDP is the monetary value of all goods and services produced in a country within a given time period. Any goods or services produced outside the specified country is not included the country’s GDP. GDP is usually used as an indicator of an economy’s health and it also measure a country’s standard of living. GDP is often calculated quarterly and yearly and is used as a comparison to the previous quarter or year. GDP is composed of overall consumption of the country, government spending, investments and net exports (exports – imports). The formula for calculating is GDP = C + I+ G + (X-M). b).Distinguish between real gross domestic product and nominal gross domestic product. Nominal Gross Domestic Product is a monetary measure of the value of finished goods and services produced for a period of time (quarterly or annually). Nominal GDP does take inflation into consideration. Real Gross Domestic Product calculates the value of economic productivity in a given year accustomed for changes in price. It takes into consideration inflation before giving results. Real GDP is very different from Nominal GDP. This is proven below: 1. Nominal GDP does take inflation or deflation into consideration in its calculation whereas Real GDP is obtained only after including the effect of inflation or deflation. 2. Nominal GDP is calculated at current...
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...Guide One purpose of this course is to integrate economic concepts and business decision making. Managers must make decisions based on available information, theoretical knowledge, and experience. This week’s information may help you understand that decisions must often be made based on limited information regarding the direction of the company, which affects revenue, pricing, and market stability. A manager must understand many factors to help a business increase revenue. One factor is that price times quantity yields total revenue for a product. Another relevant concept is that there are opportunity costs associated with any decision. Elasticity also affects revenues as managers change prices and quantities. Increasing Revenue OBJECTIVE: Choose methods to increase revenue in an organization. Resource: Ch. 1, 2, & 6 of Economics Content • Ch. 1: Limits, Alternatives, and Choices o The Economic Perspective o Theories, Principles, and Models o Microeconomics and Macroeconomics o Individuals’ Economizing Problem o Society’s Economizing Problem o Production Possibilities Model o Unemployment, Growth, and the Future • Ch. 2: The Market System and the Circular Flow o Economic Systems o Characteristics of the Market System o Five Fundamental Questions o The “Invisible Hand” o The Demise of the Command System o The Circular Flow Model • Ch. 6: Elasticity, Consumer Surplus, and...
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...The concept I will illustrate through the lens of mesoeconomics for my two current events are competition. Mesoeconomics is the bridge between macro economics and microeconomics. The circular flow of the economy is influenced by mesoeconomics. Competitions for online banking customers are intense among top U.S. banks; because of increased unemployment, credit crisis and the overall poor health of the U.S. economy. Marc Trudeau states “Americans have less cash, are spending less and have experienced a significant decline in the value of their assets. There are shifts in the way consumers manage their finances online.” Less frequent visits to banking websites, has significant implications for banking marketers trying to reach new customers. Consumer spending is at its all time low with the poor health of the U.S. economy. However, Wal-Mart and Target are competing for consumers who spend less money, because both companies are serious about keeping prices low. In addition, Dollar General, Family Dollar and Radio Shack have reemerged their low prices to compete with Wal-Mart and Target stores. This strategy stops Wal-mart and Target from becoming a monopoly. Although low prices are important to both stores, changes in brand images are the indicator of which store has quality products for lower prices. Essentially, in my two current events, the consumers are a representation of microeconomics. The top U.S. banks, Target and Wal-Mart are representations of macroeconomics...
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...domestic product (GDP) or gross domestic income (GDI) is a measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living, though its use as a stand-in for measuring the standard of living has come under increasing criticism and many countries are actively exploring alternative measures to GDP for that purpose. GDP = private consumption + gross investment + government spending + (exports −imports), or [pic] Methods of computing GDP: There three types of methods of computing GDP; ➢ Production Method ➢ Income Method ➢ Expenditure Method Expenditure Method: This method can be explained by different types of economy sector model. E.g.: ➢ One sector economy model: Y = C ➢ Two sector economy model: Y = C+S = C + I ➢ Three sector economy model: Y = C + I+ G ➢ Four sector economy model: Y = C+ I +G + NX Where, Y = National Income C = Consumption I = Investment G = Government NX= Net Export. Four Sector economy model: In four sector economy model national income is measured by adding consumption, investment, government expenditure & net export Y = C+ I +G + NX Assumption: The basic circular flow of income model consists of following assumptions: ➢ The economy consists of four sectors:...
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...Chapter 2 Circular-Flow Diagram- a visual model of the economy that shows how dollars flow through markets among households and firms Production Possibilities Frontier- a graph that shows the combinations of output that the economy can possible produce given the available factors of production and the available production technology Microeconomics- the study of how households and firms make decisions and how they interact in markets Macroeconomics- the study of economy-wide phenomena, including inflation, unemployment, and economic growth Positive Statements- claims that attempt to describe the world as it is Normative Statements- claims that attempt to prescribe how the world should be The Economist As Scientist Economists view subject with objectivity devise theories, collect data, analyze data use scientific method The Scientific Method: Observation, Theory, And More Observation interplay between theory and observation experiments difficult in economics: have to look to history allows us to examine present and predict future The Role Of Assumptions economists make assumptions to make the world easier to understand two countries, two goods applying correct assumption to right data different assumptions for short0run and long-run effects of a change in the quantity of money Economic Models models not often real but are accurate and helpful economists use diagrams and equations omit details to show what’s truly important models are built with assumptions ...
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...article is an overall review of Keynes theories of economics as well as arguments against his philosophy. The website intertwines the Great Depression with its causes and solutions which include controversies on which solutions were successful or failures. I’ve chosen the section in our text covering the Great Depression and the Keynesian Revolution found in Chapter 33 because it correlates with my career as a high school Social Studies teacher. Usually with constraints of time and curriculum to cover, I can teach significant events in history but there are topics that I would love to divulge a little more time and understanding to not only to teach of course, but also for my own learning. Keynesian economics is one of those topics. I discuss with my classes the basics of Keynes theories and how they were applied as well as points of success, but it is difficult to go much further than that. To summarize what I learned between our text and A Review of Keynesian Theory, Keynesian economics worked at the macroeconomic level. The theories stated that the trends at the macro-level could overpower individuals and their actions at the micro-level. It emphasized the significance of the aggregate demand for goods in driving the economy, especially economies in a slump. It was based on this that Keynes advocated the idea of government intervention through policies that could fight against deflation and unemployment by encouraging macro-level demand. For example, he believed that if...
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...Introduction All economic problems arise from scarcity because human wants are unlimited but resources are limited. Economics the science of choice, it is talking about how individuals and societies make a choice from the scarcity. All economic choices can be summarized in three questions: What gets produced? How is it produced? Who gets what is produces? Economists define their work in micro and macro perspective. Microeconomics and Macroeconomics are the two major branches of economics. What is Microeconomics? Microeconomics is the study of how households and firms make decisions and how they interact in markets. So all these problems belong to microeconomics: how the consumer reacts when price changes; how the firms decide the output level and how they decide the production method; how should the firms charge their product prices. Microeconomics also considerate the demand and supply of individual goods and services and the equilibrium occurs when the quantity of demands are equal to the quantity of supplies. A typical example of microeconomics is a mobile phone manufacturer decides to charge what price of their new model of smart phone depends on the demand of the mobile markets. A number of factors would affect the demand of the mobile phone including the price of the product itself, the income of the consumer, the consumer’s amount of accumulated wealth, the price of other competitor’s product, the consumer’s tastes and preferences and the expectations...
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...called the Nominal GDP. The prices change from the inflation or deflation are not adjusted to the Nominal GDP statistics account. It doesn’t matter if they are local or foreign-owned companies. As long as the production is located within the country’s boundary, the government will take it as GDP too. For example, the debts are presented and calculated as a nominal figure, therefore, the debt-to-GDP ratio are due to the Nominal GDP. Its is because it can give us the inaccurate view of the country economy growth when the inflation is baked into the figure of the Nominal GDP.Economics is the use of resources that have alternative uses. Consumers need resources to fulfil desires. The economics has been divided into microeconomics and macroeconomics. Microeconomics is the combination word of ‘micro’ and ‘economics’ that means the study of the small individual unit. Microeconomics is known as how individuals and societies uses the resources to the production of goods and services to satisfy unlimited wants. The decision made by individuals, business and government. Microeconomics focus on supply and demand in the economy, and the price may affect. It seeks to explain how...
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... |15% | |5. |Business Maths |10% | |6. |Business Statistic |10% | |7. |HRM |10% | |8. |Business Communication and Report Writing |10% | |9. |Micro Economics |5% | |10. |Macro Economics |5% | | |Total |100% | |Management Sciences...
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