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Our padlet will provide an understanding of how the circular flow model functions in the economy. It provides a visual representation of how the cash flows in the market.

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This is a very basic version of the circular flow model to provide a sort of intro to the padlet. This will help you understand the basics of the flow model and how money and resources move around. As the padlet continues more affecting factors will be brought up as to how the system can change.

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This website, though very basic in visuals, explains different factors that could change how the flow is operated. This model provides different ways that money moves around on a wider spectrum rather than being limited to a more local model. The site also provides reasons as to why the model and its flow are important.

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The circular flow model is an economic model that presents how money, goods, and services move between sectors in an economic system.

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The Khan Academy site also talks about GDP and its role in the economy but goes over a more mathematical or numerical approach. The site goes over 2 different methods of calculation and mentions the use of a third. It is to be noted however that all methods should provide the same value. This site also has various hyperlinks containing more information on GDP and the circular flow model, most of the links are videos to other various Khan Academy videos and sources providing various examples and explanations.

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This video provides a good explanation of how the Circular flow model works in a basic economy. The way he explains the model by building upon it layer by layer provided an easy following. This video would apply more so to towns and cities rather than a country as a whole. He provided plenty of real-world examples that are very common and easy to understand, not to mention he has a mini in-video quiz to test the watchers.

The video is short and attention-drawing but yet not lacking in information. He really likes to emphasize the fact that this is an everyday 24/7 cycle and promotes an economic way of thinking.

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Circular Flow Matrix- How the economy works

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This video is an extension of the last one, in this video, he goes into detail about how circular flow is important to GDP. He provides a brief economical history of the Depression, and he does this by talking about shrinking and growing economies. He explains the information by first providing an understanding of what GDP is and how representative of the market it is. He then takes what he explains about the concept of GDP and leads into the Income Approach. The income approach dives more into what counts as GDP and what doesn't. He then ties it all back into the circular flow model explaining where it fits into the model. He also provides a fill in the blank sheet along with a multiple-choice question for the viewers to participate.

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GDP and the Circular Flow- Macro Topic 2.1

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https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-the-business-cycle/21/v/circular-flow-of-income-and-expenditures

This video gives a great breakdown in terms of different countries or places throughout the world. The man on the island benefits in multiple ways as does the firm by generating business. Both parties are gaining profit by helping each other. This extends to a larger population and multiple other strings connecting the web that forms the economy. Again capitalizing on how both parties in this specific scenario are benefitting by the presence and business of each other. This is exactly how the circular flow chart is used between countries and other continents with objects such as food, business as well as services.

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Circular flow of income and expenditures (video) | Khan Academy

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Learn for free about math, art, computer programming, economics, physics, chemistry, biology, medicine, finance, history, and more. Khan Academy is a nonprofit with the mission of providing a free, world-class education for anyone, anywhere.

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https://www.thepowermba.com/en/blog/the-circular-flow-diagram-definition-examples-and-more

This link dives deep into the types of each type of model and how each of them are used. This website shows how each use for the circular flow model has a large significance in multiple parts of todays society and economical standing. The importance of knowing how the money moves in our country is key in knowing how to spend and save said money in terms of everyone as an individual. This link has a great example of in depth details as to which in every society has a consistent flow of money circulating in order to have the stability that is necessary in society to continue functioning.

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If you still have no idea how the money cycle works, it's time for you to learn about the circular flow diagram.

Maybe the language of economics sounds like Greek to you... We get it, economists love to use all those complicated words they learned in college.

But there are concepts that can be explained in a very simple way and that's what we'll show you below.

Everything is a cycle: from buying vegetables to receiving your monthly income.

It's time to give value to everything that passes through your hands, because money is a valuable resource that can open the doors of expansion.

What is the circular flow diagram?

This way, it works like a cycle where everything comes back to its place.

Where do you think they make their purchases? Exactly, in companies. So money moves in a kind of loop where it's passed from one hand to another until it reaches its origin.

The circular flow of income explains both the basic functioning of the economy and its general state, and the higher the flow, the higher the wages people receive, which translates into a greater flow of cash circulating on the streets.

In this regard, there are two types of circular flow:

So, if you have an accident at home and you need a wrench to fix it, you go to the store and buy it. Well, this wrench represents the real flow, while the monetary flow is the money you pay for the product.

Elements that make up a circular flow

It's impossible for a country's economy to function if we don't have companies that produce the basic goods that allow us to subsist. That's why many specialists consider companies to be a fundamental indicator of the financial scale of a nation.

At the end of the day, companies generate products, services and jobs for the population, a population that exchanges them for time and workforce, which allows them to obtain money to satisfy their daily needs.

Thus, we could say that it's the first win-win relationship that ever existed in the story of humanity.

The government is a key factor in the functioning of the circular flow diagram.

The last element of the circular flow is the foreign sector: since the time of the cavemen, people have realized that they need to work together with individuals from other areas in order to survive.

This is where exports and imports come into play and strongly influence the circular flow of a country's income.
The plan is for a nation to sell more than it spends
If you think about it, the same thing happens with personal finances.

Your expenses should always be lower than your income to have financial peace of mind. Thus, if you want to manage a company, a business or even a country, you must first learn to manage your cash flow.

Why is the circular flow diagram so important in a country's economy?

Do you remember the comparison that the economist Quesnay made with the blood flow of human beings? We can say then, that money is like oxygen for an individual,

This affects companies in one way or another, since no one can permanently isolate themselves from the economic situation. Companies gradually reduce their profits and employees receive, as a consequence, a decrease in their salaries, so they can buy fewer products and services.

How does the circular flow diagram work?

Don't worry, it happens more often than it should...

That's why we decided to give you a brief explanation of this diagram as you will see it in any basic economics textbook.

1. A country's economy is made up of companies that produce goods and services

2. On the right side of the diagram, you will see companies that pay wages to their workers in exchange for work. In addition, companies must also pay landowners through the concept of rent.

3. If necessary, the corporations would have to pay back interest to the banking institutions that lent them money to set up the operations.

4. On the left side, there are the families who go to the market to offer work, land and capital. In exchange for all this they receive wages, rents and interest.

5. Later, with the money they receive, they go back to the market to buy the products and services they need for their subsistence.

6. This money usually goes into the accounts of companies, who use this capital to finance their operations and pay their payroll for manpower.

Why should you learn about the circular flow?

So far it's all very nice, but have you ever wondered how important these types of concepts are in your day to day life?

Here are some of the reasons why you should learn about the circular flow diagram:

1. You understand how the economy works

If you keep an eye on the circular flow, you will know exactly where the resources come from and the importance of balance in a country's economy.

2. You detect where the money comes from

For there to be money in your pocket you must give something in return, this is a basic principle of any economic relationship.

It's a never-ending cycle and as an entrepreneur you have to understand it perfectly.

3. You understand the government's economic policies

The government is a key player in the circular flow of income.

This way, with a little time you will be able to detect the intentions of the current government and thus protect yourself from the consequences of its policies.

Infografía: Why should you learn about the circular flow?

1. You understand how the economy works

2. You detect where the money comes from

3. You understand the government's economic policies

4. You anticipate problems

Markets where exchanges occur as a result of the circular flow of income.

1. Products and services market

Here the corporations commercialize the products

It's important to understand that the market is not necessarily a physical place, it can be any place where an exchange between product and money takes place.

2. Factors of production market

Both markets are indispensable for the functioning of the economy, so you should always keep each one in mind.

Final recommendations about the circular flow diagram

The circular flow of income is in the daily life of all of us.

No matter what you do, whether it's buying an apple or using transportation to get to work, you will always depend on it and it's time to take advantage of all its features.

Now tell us, how do you think the circular flow diagram influences the projection of your business?

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Circular Flow Diagram: definition and examples (2022)

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If you still have no idea how the money cycle works, it's time for you to learn about the circular flow diagram. Maybe the language of economics sounds like Greek to you... We get it, economists love to use all those complicated words they learned in college.

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The video starts by explaining the basic components of the model, which include households, businesses, the product market, and the factor market. It then goes on to describe how these components interact with each other to create a continuous flow of goods and services, resources, and money. The video also highlights how the circular flow model can be used to analyze economic phenomena, such as inflation and recession. Additionally, the video discusses the role of government in the circular flow model and how it can affect the economy through taxes, spending, and regulation. Overall, the video provides a clear and concise explanation of the circular flow model and its significance in the study of economics.

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What is the Circular Flow of Income Model?  |  Explained  |  IB Macroeconomics

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https://www.investopedia.com/terms/circular-flow-of-income.asp

This link helps give a further insight to how the circular flow model will run its course throughout the country in addition to helping the governments and banks adjust monetary and fiscal policies to benefit the economy as a whole. In addition to the already positive effects of the circular flow chart, the banks and governments having the power to change the policies as need be will help the positives grow as the monetary values change over time. This will mainly help the businesses as well in terms of becoming more mainstream. This is again beneficial due to the amount of growing small businesses Canada is home to. Due tot the pandemic there has been more so if there is more room for succeeding in terms of the monetary value that these businesses could being to the country.

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What Is the Circular Flow Model?

The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money.

That is the basic form of the model, but actual money flows are more complicated. Economists have added in more factors to better depict complex modern economies. These factors are the components of a nation's gross domestic product (GDP) or national income. For that reason, the model is also referred to as the circular flow of income model.

Understanding the Circular Flow Model

The basic purpose of the circular flow model is to understand how money moves within an economy. It breaks the economy down into two primary players: households and corporations. It separates the markets that these participants operate in as markets for goods and services and the markets for the factors of production.

The circular flow model starts with the household sector that engages in consumption spending (C) and the business sector that produces the goods.

Two more sectors are also included in the circular flow of income: the government sector and the foreign trade sector. The government injects money into the circle through government spending (G) on programs such as Social Security and the National Park Service. Money also flows into the circle through exports (X), which bring in cash from foreign buyers.

In addition, businesses that invest (I) money to purchase capital stocks contribute to the flow of money into the economy.

Outflows of Cash

Just as money is injected into the economy, money is withdrawn or leaked through various means as well. Taxes (T) imposed by the government reduce the flow of income. Money paid to foreign companies for imports (M) also constitutes a leakage. Savings (S) by businesses that otherwise would have been put to use are a decrease in the circular flow of an economy's income.

A government calculates its gross national income by tracking all of these injections into the circular flow of income and the withdrawals from it.

Adding Up the Factors

The circular flow of income for a nation is said to be balanced when withdrawals equal injections. That is:

The level of injections is the sum of government spending (G), exports (X), and investments (I).

The level of leakage or withdrawals is the sum of taxation (T), imports (M), and savings (S).

When G + X + I is greater than T + M + S, the level of national income (GDP) will increase. When the total leakage is greater than the total injected into the circular flow, national income will decrease.

Calculating GDP

GDP is calculated as consumer spending plus government spending plus business investment plus the sum of exports minus imports. It is represented as GDP = C + G + I + (X - M).

If businesses decided to produce less, it would lead to a reduction in household spending and cause a decrease in GDP. Or, if households decided to spend less, it would lead to a reduction in business production, also causing a decrease in GDP.

GDP is often an indicator of the financial health of an economy. The standard definition of a recession is two consecutive quarters of declining GDP. When this happens, governments and central banks adjust fiscal and monetary policy to boost growth.

Keynesian economics, for example, believes that spending leads to economic growth, so a central bank might cut interest rates, making money cheaper, so that individuals will buy more goods, such as houses and cars, increasing overall spending. As consumer spending increases, companies increase output and hire more workers to meet the increase in demand. The increase in employed people means more wages and, therefore, more people spending in the economy, leading producers to increase output again, continuing the cycle.

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The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money. That is the basic form of the model, but actual money flows are more complicated.

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1. one thing that was surprising is that the circular flow model is that it's not just a theory, but rather a simplified representation of the economy that can be used to study and analyze various economic trends and changes.

2. For businesses, the model can be used to analyze market trends and make strategic decisions. This would impact things like supply distribution, production, and more which all work into the flow model.

3. I would explain that it's a useful tool for analyzing economic interactions and understanding how various factors, such as consumer spending and government intervention, impact the economy. This is something that could provide useful within the flux of the economy and could help provide insight into what to do if the economy is changing.

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This model of the circular flow chart shows a breakdown on how the money circuits through the economy. Between the households and domestics firms of any specific country. Obviously exports and imports as well as government funds circulate through this as well in addition to the chart above.