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Describe the relationships between the major sectors of the economy.

AS 90199 ECO1.5. The Economy. Demonstrate a thorough understanding of the relationships between sectors of the economy. Excellence. 2 credits. and. Explain how changes in one sector of the economy impact on other sectors. Merit. and.

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Describe the relationships between the major sectors of the economy.

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  1. AS 90199 ECO1.5 The Economy • Demonstrate a thorough understanding of the relationships between sectors of the economy. Excellence 2 credits and • Explain how changes in one sector of the economy impact on other sectors. Merit and • Describe the relationships between the major sectors of the economy. Achieved

  2. AS 90199 ECO1.5 Topics The Economy Interdependence 2 credits The Circular Flow Model Different Markets

  3. Firms Households Income Resources Goods and Services Consumer Spending Households are consumers of goods and services and providers of resources (such as labour) Firms employ resources (such as labour) and uses them to create goods and services Goodsand services flow from Firms to Households in return for Consumer Spending (a money flow). Resources flow from Households to Firms in return for Income (a money flow).

  4. Firms Households Income Resources Goods and Services Consumer Spending In which flow or sector would you classify the following? A snowboard Goods/Services The buyer of a snowboard Households Money spent on a snowboard Consumer Spending Timber for the core Resources A snowboard manufacturer Firms A factory worker Resources Wages paid to a factory worker Income Payment for timber Income Profits from the sale of snowboards Income

  5. Resources Savings Goods and Services Investment Firms Households Finance Income Savings can be defined as income not spent Investment can be defined as the creation of capital goods The model can be simplified by leaving out the Real Flows. Consumer Spending

  6. Income Savings Investment Firms Households Consumer Spending Finance Savings can be defined as income not spent Investment can be defined as the creation of capital goods In which flow or sector would you classify the following? Chris deposits money in the bank Savings Chris buys a snowboard Consumer Spending LBJ Ltd buys a cutting machine Investment Chris buys shares in LBJ Savings LBJ uses a share float to expand their factory Investment Chris receives his salary Income Chris gets a dividend on his shares Income LBJ researches a new snowboard design Investment

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