Circular Flow Model Flashcards
What is the circular flow model
The relationships between sectors in the Australian economy
What are the five sectors
Households
Businesses
Finance
Government
Foreign
What are households
The consuming unit and also the supply of labour that is required by businesses
What are businesses
Productive units of the economy
How does the money flow from the business sector to the household sector
In the form of income
How does money flow from households to businesses
In the form of consumer expenditure
What is the finance sector
Mainly banks
How does money flow from households to the finance sector
In the form of savings
How does money flow from the finance sector to businesses
In the form of investments
What is the government sector
All three levels of government
- federal
- state
- local
How does money flow from households to Goverments
In the form of taxation
How does money flow from the government to businesses
In the form of government spending
What is the foreign sector
Other countries economies as a collective whom we trade with
How does money flow from households to the foreign sector
In the form of imports
How does money flow from the foreign sector to the business
In the form of exports
What are injections
They expand the economy
What are the three injections
Investments
goverment spending
exports
What are leakages
These contract the economy
What are the three leakages
Taxes
Savings
Imports
What is a fiscal policy
The use of federal government budget in order to achieve objectives via goverment expenditure or taxation
