The term “circular flow” is one that has been used for quite some time, but what it really means is something more specific. In this case, the circular flow of economic activity is actually a mathematical model created by economists to help them predict the future course of the economy. This is usually done through a process of algebra. What happens here is that a given economic data set is broken down into its components such as personal consumption expenditure, fixed investment income, gross domestic product, and so forth. The output of this process is what we term “circular flows”.
For example, if you look at the recent economic decline, you'll see that there are a number of different circular flows that can be identified in that situation. Some of the main factors driving this are the huge amount of consumer debt, coupled with record high levels of household borrowing (often from financial institutions). Combined with a slowing economy and high unemployment rate, the result is that household income is becoming increasingly squeezed. But it is worth noting that there has been some increase in real estate activity as well, which again points to a flow of circular activity that is being re-cycled back into the economy.
Another good example of a circular flow is the international trade. Here, there are many different examples of the process happening right now. One of these is the European Central Bank's willingness to print more money to pay for past debts. In doing so, this will go to buying more bonds, which will then potentially be repaid by lending to other countries in the region. This can be seen as a re-cycled form of economic stimulus, in that bonds can be used to finance current economic activity.
There are many different elements to this type of economic model. The first is that the circular pattern is something that is a general feature of the economy, rather than being a reaction to any particular event or situation. In fact, it is a general tendency that is present in all economic activity. It tends to build on previous increases in economic output, and also on the growth rates of various nations. The circular nature of the flow makes it easy to keep track of economic output over time.
The circular flow also tends to have a fairly natural feel to it. It is not overly dramatic or filled with overly complicated language or analysis. This makes it much easier for people to understand and even to predict future patterns. This is important, because this is one of the key factors in understanding what factors will affect the economy in the long run, and what effects any particular event may have on the process.
This is just one of the flow of economic activity examples out there. There are many others. All of them help to illustrate how easy it is to keep an eye on the flow of economic activity going on within the economy. This is something that is especially useful to see these days, as it helps to show how . . . . . . quickly and effectively economies can grow when they are being watched.