Principles of Micro Economics SUO2 Economics
Circular flow diagram
Government SSeacvtoinr
Borrowings
Taxes
gs
Savings
Borrowings
Households Financial Institutions
Investmen Wages
The circular flow of income explains o w money flows from the different sectors of the
economy.
Fir
Gross Domestic Product = Income= P ms nding
The flow of income and expenditure between the households and the government involves the
household paying income tax to the government while the government offers benefits like
pension benefits, transport, education among others. The household sector provides labor for the
firms and are compensated with wages. The net amount of money after paying taxes to the
government is called the disposable income.
The flow of income and expenditure between the government and financial institutions involves
the government saving and investing some of the money it has collected into the financial
institutions. The government also borrows from the financial institutions to meet its current
expenditures.
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, The flow of income and expenditure between the government and the firms involves the firms
paying taxes for the production while the government buys and provides subsidies for the firms.
The total value of production in an economy is measured by the total flow of money from the
firm sector to the economy.
Production = Consumption + Investment + Government Purchases
Production Possibilities Model
The production possibility frontier (PPF) is a line that shows the different amounts of a two
products that can be manufactured if their production depends on a non-renewable resource. The
PPF illustrates the maximum production capacity. When the PPF shifts outwards, it implies an
increase in the production inputs; labor capital or even technology. The PPF is also known as the
transformative curve.
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Circular flow diagram
Government SSeacvtoinr
Borrowings
Taxes
gs
Savings
Borrowings
Households Financial Institutions
Investmen Wages
The circular flow of income explains o w money flows from the different sectors of the
economy.
Fir
Gross Domestic Product = Income= P ms nding
The flow of income and expenditure between the households and the government involves the
household paying income tax to the government while the government offers benefits like
pension benefits, transport, education among others. The household sector provides labor for the
firms and are compensated with wages. The net amount of money after paying taxes to the
government is called the disposable income.
The flow of income and expenditure between the government and financial institutions involves
the government saving and investing some of the money it has collected into the financial
institutions. The government also borrows from the financial institutions to meet its current
expenditures.
This study source was downloaded by 100000856941565 from CourseHero.com on 11-12-2022 16:40:45 GMT -06:00
https://www.coursehero.com/file/78282593/Principles-of-Micro-Economics-SUO2-Economicsediteddocx/
, The flow of income and expenditure between the government and the firms involves the firms
paying taxes for the production while the government buys and provides subsidies for the firms.
The total value of production in an economy is measured by the total flow of money from the
firm sector to the economy.
Production = Consumption + Investment + Government Purchases
Production Possibilities Model
The production possibility frontier (PPF) is a line that shows the different amounts of a two
products that can be manufactured if their production depends on a non-renewable resource. The
PPF illustrates the maximum production capacity. When the PPF shifts outwards, it implies an
increase in the production inputs; labor capital or even technology. The PPF is also known as the
transformative curve.
This study source was downloaded by 100000856941565 from CourseHero.com on 11-12-2022 16:40:45 GMT -06:00
https://www.coursehero.com/file/78282593/Principles-of-Micro-Economics-SUO2-Economicsediteddocx/
