Week 3

Question 1

The Circular Flow of Income

Answer 1

The most important assumptions of a model are not the equations, but what’s not in them.

Question 2

Assumptions of Banks

Answer 2

Commercial banks turn
savings into investments.

Question 3

Reality of Banks

Answer 3

Commercial banks create
money by issuing debt with interest.

Question 4

Assumptions of the Government

Answer 4

Government spending is limited by Tax Expense

Question 5

Reality of Governments

Answer 5

Governments with sovereign currencies can spend money in existence.

Question 6

Assumption of the Economy

Answer 6

The economy is self contained

Question 7

Reality of the Economy

Answer 7

The economy is a subsystem of the living world

Question 8

Assumption of the Household

Answer 8

The is no value added in the Household

Question 9

Reality of households

Answer 9

Much value is created within the household through unpaid reproductive labour.

Question 10

Assumptions on goods in the economy

Answer 10

All goods are transacted

Question 11

Reality of the goods in the economy

Answer 11

many valued goods and services are co-created in the commons, unpriced

Question 12

Assumption of power in the Economy

Answer 12

Power market affect markets

Question 13

Reality of power in the economy

Answer 13

Wide inequalities of wealth tend to concentrate economic and political power

Question 14

What is within the economy

Answer 14

1. Household
2. Market
3. State
4. Commons