THE FULL CIRCULAR FLOW

(Credit: http://www.eoearth.org/article/Neoclassical_economic_theory)

This image depicts the variables in our current economic system, but take note that there is no environmental variable, no mention of resources as non renewable, the model is predicated on the assumption that those inputs will never run out. These outside forces that threaten the stability of the closed system are considered exogenous, and thus not incorporated into the market flow.

How can this even be deemed as acceptable in today’s reality? Damage to ecological stability is an essential cost of production that could lead to the self-decimation of our species and yet economic theory hasn’t even been modified to account for the real effects of our global market system. How many tons of coal were burned to power the production of this project that was then shipped via a massive form of transport completely reliant upon oil, emitting carbon dioxide into the atmosphere that stays there for a hundred years rapidly warming the biosphere in which human life is preciously cradled? Am I supposed to ignore this phenomena of truth?

Religious Narrative was the original attempt to explain the unexplainable by the human species.

Sometime after the random mutation leading to the repositioned Larynx and the development of language human beings became conscious of themselves, conscious of an inner self that is, and they began to ask those questions which are inherent to our species.

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THE PHASES OF THE BUSINESS CYCLE

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Aggregate Demand (AD) Curve

In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy (Y) at a given time and price level. It is the amount of goods and services in the economy that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country when inventory levels are static. It is often called effective demand, though at other times this term is distinguished.

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What Is the Meaning of Per Capita Income?

Per capita income in a growing country should look like this.

Understanding the statistics used to evaluate different countries on a level field is key to improved geopolitical awareness. Economists need tools to evaluate distinct regions and countries that attempt to smooth out the difficulty of comparison. Per capita income is one way to evaluate relative wealth and overall well-being. Per capita income literally means income per head; it represents average income for a country or region.

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How to Calculate Per Capita Income

        1

        To calculate per capita income, you must first know the Total Personal Income and the Population for the area in which you want to determine Per Capita Income.
        2

        To find the per capita income of an area, use the following formula:

        pci = i/P

        Where:
        pci = per capita income
        i = total personal income
        P = total population
        3

        Example of per capita income calculation:
        In 2006, the United States had a total personal income of $10,968,393,000,000. The total population of the U.S. in 2006 was approximately 300,000,000. Therefore, the per capita income of the United States in 2006 is:
        pci = $10,968,393,000,000 / 300,000,000
        pci = $36,561

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Calculating GDP

n this module, you will learn

• how to calculate the GDP
• how to use moneychimp.com to further understand money flow in the GDP - submodule includes 4-question GDP Money Flow Quiz
• how to calculate GDP in a practice example - submodule includes 1-question GDP Calculation Quiz
• how to understand the role of Personal Savings and how to use U.S. government information to verify the formula in the real world

Tutorial: How to calculate the GDP
The basic formula for calculating the GDP is:

Y = C + I + E + G

where 

Y = GDP

C = Consumer Spending

I = Investment made by industry

E = Excess of Exports over Imports

G = Government Spending

This formula is almost self-evident (if you take time to think about it)!
GDP is a measure of all the goods and services produced domestically. Therefore, to calculate the GDP, one only needs to add together the various components of the economy that are a measure of all the goods and services produced.
Many of the goods and services produced are purchased by consumers. So, what consumers spend on them (C) is a measure of that component.
The next component is the somewhat mysterious quantity "I," or investment made by industry. However, this quantity is mysterious only because investment does not have its ordinary meaning. When calculating the GDP, investment does NOT mean what we normally think of in the case of individuals. It does not mean buying stocks and bonds or putting money in a savings account (S in the diagram). When calculating the GDP, investment means the purchases made by industry in new productive facilities, or, the process of "buying new capital and putting it to use" (Gambs, John, Economics and Man, 1968, p. 168). This includes, for example, buying a new truck, building a new factory, or purchasing new software. This is indicated in the diagram by an arrow pointing from one factory (enterprise) to another. In essence, it shows the factory "reproducing itself" by buying new goods and services that will produce still more new goods and services. NOTE: There is a money-flow relationship between personal savings, S, and investment, I, but this does not figure directly in calculating the GDP. See Exercise 3 below. The next component is E, or the difference between the value of all exports and the value of all imports. If Exports exceeds imports, it adds to the GDP. If not, it subtracts from the GDP. Thus, even if a nation's people work very hard to produce products for exports, but still import more than they export, the nation's GDP will be negatively impacted. This is one of the reasons trade deficits are frequently a political target. Because the balance of trade can be either positive or negative, we can rewrite the equation, showing the components of E, using X for Exports and M for Imports:

Y = C + I + (X - M)+ G

You may see the formula for the GDP written this way, and it may be easier for you to remember in this format.
The final component is G. The government buys (with your tax money) goods and services (G). These purchases are a measure of those goods and services produced. Be aware that many people make the mistake of thinking that the money paid in taxes and spent by the government is "lost" and therefore subtracts from the GDP. Tax money may indeed be spent inefficiently but this fact has no bearing on the calculation of the GDP.
Exercise 1: Understanding Money Flow in the GDP Components
Study the diagram below (source: www.moneychimp.com). The solid arrows indicate the components of the GDP, and the direction of the money flows. The arrow indicating the Trade Deficit would be in the opposite direction in the case of a Trade Surplus.

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Gross Domestic Product.

Gross Domestic Product. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. The GDP report is released at 8:30 am EST on the last day of each quarter and reflects the previous quarter. Growth in GDP is what matters, and the U.S. GDP growth has historically averaged about 2.5-3% per year but with substantial deviations. Each initial GDP report will be revised twice before the final figure is settled upon: the "advance" report is followed by the "preliminary" report about a month later and a final report a month after that. Significant revisions to the advance number can cause additional ripples through the markets.

The GDP numbers are reported in two forms: current dollar and constant dollar. Current dollar GDP is calculated using today's dollars and makes comparisons between time periods difficult because of the effects of inflation. Constant dollar GDP solves this problem by converting the current information into some standard era dollar, such as 1997 dollars. This process factors out the effects of inflation and allows easy comparisons between periods.

It is important to differentiate Gross Domestic Product from Gross National Product (GNP). GDP includes only goods and services produced within the geographic boundaries of the U.S., regardless of the producer's nationality. GNP doesn't include goods and services produced by foreign producers, but does include goods and services producedW by U.S. firms operating in foreign countries.

 

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Gross Domestic Product - GDP

Gross Domestic Product - GDP What Does It Mean? What Does Gross Domestic Product - GDP Mean? The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. 

GDP = C + G + I + NX  where:  "C" is equal to all private consumption, or consumer spending, in a nation's economy "G" is the sum of government spending "I" is the sum of all the country's businesses spending on capital "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)

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What Is FDI?

Foreign direct investment (FDI) or foreign investment refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares. FDI is one example of international factor movement.

FDI is a measure of [ ownership]] of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. The figure below shows net inflows of foreign direct investment in the United States. The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). But flows to non-industrialized countries are increasing sharply.

US International Direct Investment Flows:

Period	FDI Inflow	FDI Outflow	Net Inflow
1960-69	$ 42.18 bn	$ 5.13 bn	+ $ 37.04 bn
1970-79	$ 122.72 bn	$ 40.79 bn	+ $ 81.93 bn
1980-89	$ 206.27 bn	$ 329.23 bn	- $ 122.96 bn
1990-99	$ 950.47 bn	$ 907.34 bn	+ $ 43.13 bn
2000-07	$ 1,629.05 bn	$ 1,421.31 bn	+ $ 207.74 bn
Total	$ 2,950.69 bn	$ 2,703.81 bn	+ $ 246.88 bn

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What Is FDI?

These three letters stand for foreign direct investment. The simplest explanation of FDI would be a direct investment by a corporation in a commercial venture in another country. A key to separating this action from involvement in other ventures in a foreign country is that the business enterprise operates completely outside the economy of the corporation’s home country. The investing corporation must control 10 percent or more of the voting power of the new venture.

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What Is Managerial Economics?

Managerial economics is a form of economics that focuses on the application of economic analysis and statistics for business or management decisions. It is usually a combination of traditional economic theory and the practical economics seen every day in the business environment. Managerial economics provides users with a more quantitative analysis of business situations through the use of mathematical formulas and other calculations, including risk analysis, production analysis, pricing analysis and capital budgeting. Most businesses use some form of managerial economics in their business operations.

Companies often include risk in a managerial economic process to determine what might happen if a significant shift occurs in the

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What is Economics?

Economics is the study of the production, distribution, and consumption of goods and services — the economy. Economists attempt to understand the economy and the way it responds to various influences, such as changes in federal interest rates. Economics is considered a social science.

Modern economics began in 1776, with the publication of Adam Smith's Wealth of Nations. This was the first comprehensive defense

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What Is the Difference Between Return on Assets and Return on Equity?

The difference between return on assets and return on equity in a general sense is based on gross versus net profits. Assets usually represent the market price of durable goods such as real estate, automobiles, and heavy construction equipment, and businesses themselves or investments like bonds that hold their value over time. Equity, on the other hand, represents what the actual monetary value of something is after all outstanding debts and liens have been subtracted from it, and this can also include taxes that must be paid

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What is Economic Growth?

Economic growth is a term generally measured by the amount of production in a country or region over a certain period of time. While financial ministers may keep track of economic growth numbers every month, generally it is the quarterly and annual numbers that attract the most attention. In addition to production, measured through the gross domestic product, or GDP, local governments and individuals may use a different standard to measure economic growth.

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What Is a Capital Intensity Ratio?

The capital intensity ratio is a financial calculation measuring how much a company is invested in fixed assets compared to how much it is earning in revenue. It is calculated by dividing the value of its fixed assets in a specific time period by the amount of revenue it has earned in the same period. What the capital intensity ratio shows is just how much capital it takes a firm to generate a single dollar of revenue. Like all financial ratios, this one is best used when comparing companies in a single industry to one another.

Companies have to attempt to balance out how much money they spend with home much they earn. It seems like an obvious truth, but

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What Is a Laissez-Faire Economy?

A laissez-faire economy is driven by the market. In theory, it is free of all government intervention, though in reality there has not been a long-lasting, purely laissez-faire system. It is based on the belief that the pattern of supply and demand is sufficient to promote a strong economy. Laissez-faire is a French term which means to “leave alone” or “let do.”

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What Is Keynesian Economics?

Keynesian economics is an economic theory named after John Maynard Keynes (1883 - 1946), a British economist. It was his simple explanation for the cause of the Great Depression for which he is most well-known. Keynes' economic theory was based on an circular flow of money. His ideas spawned a slew of interventionist economic policies during the Great Depression.

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What is Currency?

Currency is the means of purchasing through trade. Today, currency generally refers to printed or minted money. Sometimes only paper bills are thought of as currency, while other times coins are included. Currency involves the exchange of goods or services for cash.

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More of money study ,What Is Money?

Money is a good that acts as a medium of exchange in transactions. Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange. Most authors find that the first two are nonessential properties that follow from the third. In fact, other goods are often better than money at being inter temporal stores of value, since most monies degrade in value over time through inflation or the overthrow of governments.

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What Is Money?

Everyone uses money. We all want it, work for it and think about it. If you don't know what money is, you are not like most humans. However, the task of defining what money is, where it comes from and what it's worth belongs to those who dedicate themselves to the discipline of economics. While the creation and growth of money seems somewhat intangible, money is the way we get the things we need and want. Here we look at the multifaceted characteristics of money. (Get A Short-Term Advantage In The Money Market. This investment vehicle is often the perfect stop-gap measure for growing your money.)

What is Money?

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