Circular flow - open with government
How important is the role of government in the economy?You need to be able to explain every component in the model identifying injections and leakages
In the 3-sector open economy circular flow of income, we could also represent the government separately in this circular flow - here's an alternative representation of the 3-sector open economy circular flow. It shows exactly the same flows, but represents them a little differently.
In this diagram, why a big box in the middle for government? Just how big a player do you think the government is in the economy?
Useful Internet sites for research are:
- The World Bank site. To access details about countries and economies, follow this link.
- The OECD statistics portal.
- Identify the proportion of national income represented by government expenditure in your country.
- Identify the proportion of national income taken up by government spending for the following countries
- Hong Kong
- Considerthe differences in the proportion of national income represented by government spending in the countries above and with your country.
- Reflect on the reasons for these differences and remember these findings as you work your way through the macroeconomics pack.