Download Sectors of the economy

Sectors of the economy:
You need to know how to construct the circular flow diagram with real and money flows.
Interdependence: The two-way reliant relationship between sectors.
Explain the interdependent relationships between the sectors
eg The household sector relies on the producer sector for goods and service. The
producer sector relies on the household sector for payments for the goods and services as
income. They rely on each other therefore they are interdependent.
Describe injections and withdrawals from the circular flow
Household sector:
Provide all factors of production to producer sector.
Provides the consumer sector for the producers
Consumer markets can be classified by products or by demographics
Interrelationships with other sectors:
Firms=GST
Firms=Factors of production
Financial=Savings
Govt=PAYE
Overseas=Tourism
Factors of production include:
Capital (Dividends)
Enterprise (Profit)
Land (Rent)
Labour (wages)
Producer Sector:
Provides means to enable households to “consume”
Uses factors of production
Provides reward to household, which allows consumers to buy goods and services
Also gets ‘inputs’ from financial sector in the form of loans
Collects tax for Govt GST (indirect tax)
Financial Sector:
Made up of: financial Institutions, registered banks, Reserve bank (Govt bank), Nonregistered banks, building societies/ Credit union, Private Investment firms.
Accept household savings and pay reward of interest earned.
Invest these funds into Producer sector and charge fee of interest paid.
Also collect tax on behalf of Govt (RWT)
Overseas Sector:
Also called Trade or Tradeable
Physical flows include:
Inwards=imports ($ flow in )
Outwards= exports ($ flow out)
Tourists:
Foreign visitors in NZ=exports
NZ tourists going overseas=imports
Money flows are:
Costs of Imports=Import payment
Cost of Export=Export receipts
The balance between the inflow /outflow is called the balance of payments
Government Sector:
Govt involved in:
Production (Banking, TV, Airlines, hospitals)
Transfers (GST, PAYE, RWT, subsidies, tariffs)
Govt takes action to:
Safety and security
Stability of incomes and prices
Safety net for disadvantaged
Equality of treatment
The Market
Market: A place or situation where buyers and sellers exchange goods and services
Market in the Economy:
Goods and Services Market:
Traditional sense of market
Exchange prices for items
Resource Market:
Producer use recourse inputs
Inputs of production are capital, enterprise, land and labour.
Prices paid by producers are:
Capital (Dividends, interest)
Enterprise (Profit)
Land (Rent, leases)
Labour (wages)
Money Market:
Those who have savings present their ‘good’ to those who want to use the funds for
productive purposes. The price to obtain savings from depositor’s is ‘interest earned’.
The price to obtain business loans from financial institutions is ‘interest paid.’
Foreign Exchange Market:
Prices change by the minute
Demand comes from Tourists, Importers, Foreigen Investors, so does supply
Non-Market
Local currency exchange systems eg vouchers, point systems
Barter
DIY
Self Sufficiency
The level of consumption is lower than the total level of income because some is
deducted as income tax or not spent (ie saved)
The link between income and consumption is as income rises so does consumption.
At lower income levels a high proportion of income is spent on necessities/inferior goods.
At higher levels a higher proportion of income is spent on luxuries.
TAXES:
Direct tax:
Direct because payer cannot pass the tax onto another payer
Payed out of income, therefore reducing disposable income
Consumer ability to pay is reduced therefore demand reduces
Indirect