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7/27/2019 Outflows and Inflows (2)
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Outflows and Inflows of the
Circular Flow
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Circular F low
Common ly referred to as sets of
act iv i t ies that are taking p lace in the
econom ic system of our count ry.
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The Outf lows and I nf lows
In the economic system, we may have experienced
the decrease and increase of money supply in the
economy.
There are times that there are plenty of money and
sometimes, almost scarce or few.
These kinds of phenomena are brought about by the
Changes in the outflows and inflows in the
economic system.
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In Circular Flow ..
The household receives income from the
f irm. I t is assumed that the incomes
received by the households are all spent forconsumption, and goods and services are
all sold out.
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In Circular Flow ..
Not all incomes are spent. There are factors
that affect the individual consumer is not
to uti l ize his income.
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SAVINGS
The individual consumer tends to save for
future use. Usually, he deposits his savings
in the bank.
Savings is an income not spent for
consumption.
Savings represent a non-use of output.
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TAXES
It is compulsory contribution to support the
government.
Taxpayer, as good citizens, has theresponsibility to contribute a fair share to
the cost of the government
People pay their taxes in accordance withthe benefits they receive from the
government. It is like buying goods and
services in the market.
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IMPORTS
These are goods brought by the Philippines
from other countries.
The country resorts to importation if ouragriculture and industries cannot supply the
necessary goods that the consumers need.
No country can be completely selfsufficient.
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With the outflows taking place in theeconomy, we are bound to experience
recession.
Outf lows can be checked by bringing back
the funds into the circular f low and this can
be attained throughinvestment, government
expenditures and exports.
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I nvestment
It constitute a spending decision that results
in the use of output and productive
resources
Savings made by the depositors is invested
into business by the bank. This may be in
the form of business or lending the moneyto people who will likewise invest the
money.
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I nvestment
If investment equals the savings, then it
offsets the outflows caused by the savings
It is volatile because it is tied so closely to
the state of business confidence and to
expectations about the future performance
of the economy.
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Exports
Products purchased by the country from
other countries are reciprocated by foreign
countries by buying our products.
When the Philippines export goods to other
countries, payments are made and this
money goes back into the circular flow
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I nvestments, government
expenditures and exportsareinflows in our economy.
An INFLOWis a flow of income
that brings back funds into the
circular flow.
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When outflowsEQUAL theinflows, the level ofeconomic
f low is maintained.
Too much outf lows of moneyin
our economy wil l result toDEFLATION
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PRODUCER
Compete on the fewer pesos in thehands of the CONSUMERS
Drop in the price level and rise in the value of
pesos.
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DEFLATIONmay be described as plenty of
goods chasing after too few pesos.
Too much inflows of money into our economy usually
results to INFLATION, a decline in the value of money,
with an upward movement of the price level.
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When the amount of money in circulation increases, people
have more money to spend.
There will be an increase in demand.
Therefore, consumers compete for available goods.
They pay more pesos for the goods they want and
consequently , an increase in price.
INFLATIONthen can be described as too much pesos going
after a small number of goods
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Inflows and outflows will never
be equal. There will always be
imbalance between the two, andthe imbalance
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Outflows and inflows will never be equal.There will always be imbalance between the
two, and the imbalance can be checked by the
economic policies of the government.
The reasons for these imbalances are
CONSUMERS BEHAVIOR and INCOME
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Assignment : Essay Analysis
A. What are the effects of outflows andinflows in the Economic System of the
Philippines?
A. Cite examples of outflows and inflows in
our economy. Support your examples by
expounding it through explanation.
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Guidelines for the Essay
Analysis: It should be electronic copy.
Use calibri font style with 11 as font size
It should be double space.
Use short bond paper.
A minimum of 3 pages analysis and 5 pages
maximun. Deadline : August 2, 2011
Failure to submit means zero.
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REMINDER:
Be ready for a quiz next meeting