![]() ![]() ![]() The total amount of goods and services that are produced, bought, and sold is equal to o. Together, the provision of goods and the payment for them constitute the product market. What do the businesses do with all those resources? Since we assumed no investment in new capital, no government, and no foreign sector, all they can do is produce consumer goods and sell them to households.Īnd what do the members of the households do with their incomes? Since we assume no savings, government, nor foreign sector, all they can do is spend the money on consumer goods - consumption. Together, the supply of resources and the payments for their use constitute the factor market. In return for the factors of production (resources or inputs), businesses pay incomes: wages, rent, interest and profits to the members of the households. They not only bring with them their labor, but also all the other factors of production, including land (natural resources), capital, and entrepreneurial talent. The flow begins with workers leaving their households and going to work at businesses. ![]() The same cash is spent by one sector and then the other continuously. This paper revisits the traditional ‘circular flow’ of the macroeconomy (Samuelson, 1948) and reworks it to capture the use of big data and artificial intelligence in the economy. Each provides the other with some real resource and each receives cash in return and each spends that cash on the supplies of the other. There is then a total of four flows in this highly stylized account of how economies function, and there is complete symmetry between the two sectors: households and firms. The circular flow of economic are the real interactions (of goods and services) and monetary (money and values) interactions that occur in a market, and this is reflected through a simple graphic representation. Corresponding to each of these flows of cash is a flow of some resource in return - labour is provided by households to firms goods and services are provided by firms for households. Secondly, there is the money spent by households and received by firms. First, there are the wages and salaries paid by firms to households. A number of flows comprise the circular flow of income. A simple model of the workings of an economy depicting the movement of resources between producers and consumers. ![]()
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