Created 4/9/1998
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Flows of Incomes, Expenditures, Factors of Production, and Goods and Services

J. Bradford DeLong

The circular flow of economic activity is really two flows--a flow of money, and a flow in the opposite direction of commodities of value.

Along the lower branch of the circular flow, expenditures flow from households to businesses. But the goods and services that those expenditures pay for--the commodities that households value--flow in the opposite direction, from businesses to households.

Along the upper branch of the circular flow, incomes flow from businesses to households. The counterflow along the upper branch is the flow of factors of production--the labor time of workers, the rental of capital and land, and the returns to risk-bearing, entrepreneurship, and management.

The Circular Flow     The Expenditure Side of the Circular Flow     Flows: Incomes, Expenditures, Factors, and Goods  

Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax

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