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The Circle Flow

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Submitted By hallleanne
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The Circle Flow
By Leanne Hall
ECON224-1203A-06
Edward Hale
American InterContinental University
June 14, 2012

Abstract
In this I will explain and define what open and closed systems are. I will be examples of both. I will also explain the inner and outer flows of both systems. In an open system there are injections, leakages, and I will explain, define them, and I will also give examples of both an injection, and a leakage.

Economics is a very interesting subject to learn about. Learning about how the economy works, being able to understand how to depict the graphs. For most people they do not know the meanings of open and closed systems. These systems are the heart of how money flows through a circular flow system. Within the flow system there are loop holes that are what they call injections, leakages. With the flow system it is easy to understand once a person knows and is able to define what open, and closed systems means in the economic world.
There are two economic models that show how the flow of money goes in our economy. According to our text book a closed system only counts the domestic trades within our country. They do not count any of the foreign goods or exports that are brought in (Macroeconomics, 2012). When a person needs to go buy groceries they enter the goods market to get that product. Companies enter the factor market. When looking at a chart there is a large circle then a smaller circle in the middle. The outer circle represents the goods market; the inner circle represents the factors of production. For example in the goods market an individual buys a product from a producer, the money that is exchanged is going in a circular motion from the household to the business.

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