Breaking Down the Economics of Two-Sector Circular Flow : How Households and Businesses Drive the Economy Forward
This literature study uses the PRISMA technique to examine the two-sector economy model of the circular flow of income. It sought to explore the circular flow of income in a two-sector economy, explain the circular flow of income in the Product and Resource markets, and determine the significance of the circular flow of income in a market economy. The model only considers two sectors: households and companies. Because consumers are expected to spend their whole income on consumer goods and services provided by businesses, savings, taxes, and investments have little impact on other sectors. The circular flow graphic represents household and firm interactions in labor, products, and services marketplaces. In the product market, commodities and services are exchanged for money, with businesses supplying and households lacking. In the resource market, money will be exchanged for raw goods, with households donating and businesses seeking. The significance of the circular flow of income in a market economy is emphasized. It is stated that it provides a comprehensive view of the economy. It indicates that if it is working correctly, there are any disturbances to its smooth operation. The circular flow is crucial in supporting the government in formulating policies to encourage consumer spending, maintain balance, and promote economic growth, such as tax breaks or increased government spending
Year of publication: |
[2023]
|
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Authors: | Saavedra, Lilian ; Ubas, Sheryl ; Vigonte, Florinda ; Abante, Marmelo V. |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (9 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 8, 2023 erstellt |
Other identifiers: | 10.2139/ssrn.4441167 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014350588
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