The Circular Flow
In this lesson on the Circular Flow, you will learn the following concepts:
*What is a simple circular flow model?
*What is the difference between the terms endogenous and exogenous?
*What is meant by injections and withdrawals from the circular flow model?
*What are the differences between a simple and a more complex circular flow model?
1. What is a simple circular flow model?
The simple circular flow model is comprised of just the private sector, which includes private
individuals, private households, and private firms. In the lesson below, you will learn how financial
capital (money) and resources (land, labor, capital) flow from households to firms and from firms to
households.
*What is a simple circular flow model?
*What is the difference between the terms endogenous and exogenous?
*What is meant by injections and withdrawals from the circular flow model?
*What are the differences between a simple and a more complex circular flow model?
1. What is a simple circular flow model?
The simple circular flow model is comprised of just the private sector, which includes private
individuals, private households, and private firms. In the lesson below, you will learn how financial
capital (money) and resources (land, labor, capital) flow from households to firms and from firms to
households.
In this lesson on the Circular Flow, you have learned the following concepts:
*What is a simple circular flow model?
*What is the difference between the terms endogenous and exogenous?
*What is meant by injections and withdrawals from the circular flow model?
*What are the differences between a simple and a more complex circular flow model?
*What is a simple circular flow model?
*What is the difference between the terms endogenous and exogenous?
*What is meant by injections and withdrawals from the circular flow model?
*What are the differences between a simple and a more complex circular flow model?
2. What is the difference between endogenous and exogenous?
Endogenous means "from within." Exogenous means "from the outside."
So, the lesson above relating to the simple circular flow is endogenous. Everything that was discussed in that
lesson (individuals and firms) is within the model. The lessons below will include exogenous factors that come
from outside the model and affect what is inside the model.
3. Injections and Withdrawals from the Circular Flow
Injections and withdrawals from the Circular Flow are exogenous, meaning they come from outside the circular
flow model. These injections and withdrawals come from government, financial institutions, and foreign trade.
Government can speed up the circular flow of money through an injection (government spending) or slow down
the circular flow of money through a withdrawal (taxes). The lesson below will describe these concepts.
Endogenous means "from within." Exogenous means "from the outside."
So, the lesson above relating to the simple circular flow is endogenous. Everything that was discussed in that
lesson (individuals and firms) is within the model. The lessons below will include exogenous factors that come
from outside the model and affect what is inside the model.
3. Injections and Withdrawals from the Circular Flow
Injections and withdrawals from the Circular Flow are exogenous, meaning they come from outside the circular
flow model. These injections and withdrawals come from government, financial institutions, and foreign trade.
Government can speed up the circular flow of money through an injection (government spending) or slow down
the circular flow of money through a withdrawal (taxes). The lesson below will describe these concepts.
3. Injections and Withdrawals from the Circular Flow
Financial Institutions can speed up the circular flow of money through an injection (lending) or slow down
the circular flow of money through a withdrawal (savings). The lesson below will describe these concepts.
Financial Institutions can speed up the circular flow of money through an injection (lending) or slow down
the circular flow of money through a withdrawal (savings). The lesson below will describe these concepts.
3. Injections and Withdrawals from the Circular Flow
Foreign Trade can speed up the circular flow of money through an injection (exports) or slow down the
circular flow of money through a withdrawal (imports). The lesson below will describe these concepts.
Foreign Trade can speed up the circular flow of money through an injection (exports) or slow down the
circular flow of money through a withdrawal (imports). The lesson below will describe these concepts.
Review:
Circular Flow Interactive, Part I
Circular Flow Interactive, Part II
| Steven M. Reff Economics Lecturer University of Arizona (2007 - 2016) The 2015 University of Arizona Five-Star Faculty Award |
Grokkingecon.com eWorkbook Activities
Circular Flow (Simple) (1:48 minutes)
Circular Flow (Government) (1:26 minutes)
Circular Flow (Financial) (1:44 minutes)
Circular Flow (Imports and Exports) (2:09 minutes)
Economics Systems (Injections) (2:25 minutes)
Economics Systems (Withdrawals) (1:53 minutes)
Circular Flow (Government) (1:26 minutes)
Circular Flow (Financial) (1:44 minutes)
Circular Flow (Imports and Exports) (2:09 minutes)
Economics Systems (Injections) (2:25 minutes)
Economics Systems (Withdrawals) (1:53 minutes)
Reffonomics.com 3 x 3 Videos (3-minute videos + 3 Multiple Choice Questions)
| Steven M. Reff Economics Lecturer University of Arizona (2007 - 2016) The 2015 University of Arizona Five-Star Faculty Award |
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