Running Head: Macroeconomics

Jaque Mcilwain
August 9, 2012
Morales
Macroeconomics Class Thursday 6pm

Abstract
I will be discussing the two types of circular flow diagrams: One that represents the flows in the macro-economy as closed system and one that represents the flow as an open system.

Circular Flow Diagrams.
Circular flow diagrams are an economic model that illustrates the way a countries money flows or the way a country operates. There are two different kinds of flow charts and they are classified as an open system and a closed system. An open economy is basically a country that is completely reliant on and influenced by other countries and their economies. In other words most of their flow of money is based on what other countries are doing to generate income and operates off how the other countries money flow through the economy.
A closed economy is self-reliant and is not influenced by what goes on in other countries or by what goes on outside of their economy. In other words this economy relies on itself when taking into account about the way money flows. An example of an open economy is really the world by default. If any nation trades with another country then they are known as an open economy by default. The United States and Great Britain are great examples of an open economy because they are highly dependent upon importation and exportation of goods and the industry.
An example of a closed economy would be North Korea an enemy of the United States in my opinion. They are known as a communist state. Even though North Korea is open to foreign investments and trades they only have a handful of countries they deal with and they have an ideology of being self-sufficient. The inner flow would be foreign trade and the outer flow would be foreign trade as well. The inner and outer flow of an open economy would be foreign trade, jobs,