Economic actors and the economic circuit
In this article we will see in detail economic actors and the economic circuit, in particular the duties and importance within the system.
The economic system, intended as a collection of individuals who through collaborative relationships place economic activity on a given territory, on the basis of common legal political institutions consists of subjective elements (people) and objective (production techniques,organizations,…).
These subjects may be grouped into several categories depending on the operational characteristics that distinguish them.
Here are the economic subjects in detail:
Families: consist of nuclei related by family relationships, individuals and households that constitute autonomous centers of expenditure and consumption (such as social communities, nursing homes, treatment centres,…). Families consume goods and use services to satisfy their needs. Families Save to finance future consumption and work for businesses or the State with the objective to their obtaining the means necessary to their livelihood and savings.
Another economic unit are the enterprises: can be individual or corporate (formed then by two or more owners), with public or private mandate. Companies buy the workforce by families, raw materials and inputs that turn into goods and services sold in the market. The goal of this topic is to make a profit, that is achieved if costs are lower than the revenue.
Banks: are companies specialized in the treatment of currency. The banks collect money from those who are in excess (savings) and lend it to those who need it. The main economic activities of this subject are therefore:
1)Raise capital by families
2)Finance companies that require a loan
Banks are therefore the financial brokerage firms among households and enterprises.
State: This economic unit comprises public administration bodies which provide services (Defense, user's Guide, Justice, public policy,…) to the society. They are funded through tax or pick up households and businesses taxes and when the latter resorting to private loans are not enough (amount of the loans is the debt). Produces goods offered to the community as public services, but to provide such service needs of families.
We continue this vision concerning economic actors and economic channels with some mention of the latter.
The economic circuit is simply a scheme to see the relationships between the various actors of the economy (then connect businesses, families and State banks).
In the modern economy exchanges performed always have a financial contribution: the work is remunerated at a salary, the goods and services are purchased with a sum of money, State services are paid through certain taxes etc.
The movements of currency, goods or services are defined streams. In the case of the coin you define cash flows and real flows in the case of goods or services. Between operators in the economic system they form streams of income and expenditure flows. Businesses that pay wages to their workers and revenues to the owners of production factors determine income streams towards families. Families purchasing goods and services,This involves spending flows into business, the set of flows is called income-expenditure circuit.