circflow - Keynesian Circular-Flow Analysis(Labor-Based Macroeconomics The Inherent Instability of a Wholly Private Economy(according to John Maynard

# circflow - Keynesian Circular-Flow Analysis(Labor-Based...

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Keynesian Circular-Flow Analysis (Labor-Based Macroeconomics) The Inherent Instability of a Wholly Private Economy (according to John Maynard Keynes) Roger W. Garrison 2006
Keynes’s vision of the economy suggests a circular-flow framework in which earning and spending are brought into balance by changes in the level of employment. The Keynesian Vision Graphically, the circular flow appears as the Keynesian cross, the cross’s intersection identifying the particular state of the economy in which income and expenditures are in balance. The Income-Expenditure Framework
BUSINESS ORGANIZATIONS WORKERS FACTOR OWNERS CONSUMERS LABOR AND OTHER FACTOR SERVICES INCOME THE CIRCULAR-FLOW FRAMEWORK
BUSINESS ORGANIZATIONS WORKERS FACTOR OWNERS CONSUMERS LABOR AND OTHER FACTOR SERVICES INCOME GOODS AND SERVICES EXPENDITURES Let the speed of rotation indicate the strength (fast) or weakness (slow) of the economy.
BUSINESS ORGANIZATIONS WORKERS FACTOR OWNERS CONSUMERS INCOME EXPENDITURES In Keynesian equilibrium, INCOME equals EXPENDITURES. Y = E For a wholly private economy, Y = C + I
45 o E = Y EXPENDITURES INCOME The circular character of the flow suggests an equality of left-half flow and right-half flow---as represented by a forty-five degree line passing through the origin. EXPENDITURES, which constitute the left half of the circular flow, is represented on the vertical axis. INCOME, which constitutes the right half of the circular flow, is represented on the horizontal axis.
The economy is in a Keynesian equilibrium somewhere along the 45 o line the line itself identifying all possible income-expenditure equilibrium points.

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