ECO 1102 Lecture Notes - Lecture 4: Government Spending, Cash Flow, Accounting Equation
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ECO 1102 Full Course Notes
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Market for goods and services (output markets) households are shopping for goods and services in the output market (red). The physical goods and services are being transferred from the market to the households through transactions, which is represented by the (greed line). Markets for factors of production (input market) employees sell their services to companies in the factors of production in exchange for wages/salaries. Companies pay wages of employees in the markets for factors of production (green), and households are offering their services (labour, land and capital) to companies (red) for production of products. Expenditure for one actor is income for another within each of these 2 markets. Every dollar which circulates is both income and expenditure. One person spending is necessarily income for one or more economic actors, and vice versa. A money market can be added to the model somewhere in the middle.