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[2] The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
In a study of 111 countries between 1970 and 1989, Sachs and Andrew Warner concluded that the industrialized countries had a growth of 2.3% per year per capita, open economy developing countries 4.5% and closed economy developing countries had only 2%. [2]
The social market economic model, sometimes called Rhine capitalism, is based upon the idea of realizing the benefits of a free-market economy, especially economic performance and high supply of goods while avoiding disadvantages such as market failure, destructive competition, concentration of economic power and the socially harmful effects of ...
The exchange of goods or services, with or without money, is a transaction. [1] Market participants or economic agents consist of all the buyers and sellers of a good who influence its price, which is a major topic of study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand.
If : {: =,, >} is a set-valued function with closed graph that satisfies Walras's law, then there exists an economy with households indexed by , with no producers ("pure exchange economy"), and household endowments {} such that each household satisfies all assumptions in the "Assumptions" section except the "strict convexity" assumption, and is ...
The traditional LM curve is upward sloping because the interest rate and output have a positive relationship in the money market: as income (identically equal to output in a closed economy) increases, the demand for money increases, resulting in a rise in the interest rate in order to just offset the incipient rise in money demand. [52]
The best-known such model is real business-cycle theory, in which business cycles are considered to be largely due to changes in the real economy, unemployment is not due to the failure of the market to achieve potential output, but due to equilibrium potential output having fallen and equilibrium unemployment having risen.