![1. the circular fl ow model is a simplifi ed version of our economy. describe how this model works 1. the circular fl ow model is a simplifi ed version of our economy. describe how this model works](https://www.economicsdiscussion.net/wp-content/uploads/2015/07/image4.png)
Decisions are taken as openly as possible and as closely as possible to the citizen. The EU remains focused on making its governing institutions more transparent and democratic. The EU aims to develop this huge resource to other areas like energy, knowledge and capital markets to ensure that Europeans can draw the maximum benefit from it. It enables most goods, services, money and people to move freely. The EU’s main economic engine is the single market. Every EU country must treat EU citizens in exactly the same way as its own citizens when it comes to matters of employment, social security and tax. All EU citizens have the right and freedom to choose in which EU country they want to study, work or retire. And it has become much easier to live and work in another country in Europe. Thanks to the abolition of border controls between EU countries, people can travel freely throughout most of the continent. More than 340 million EU citizens in 19 countries now use it as their currency and enjoy its benefits. The EU has delivered more than half a century of peace, stability and prosperity, helped raise living standards and launched a single European currency: the euro. A name change from the European Economic Community to the European Union in 1993 reflected this. What began as a purely economic union has evolved into an organisation spanning many different policy areas, from climate, environment and health to external relations and security, justice and migration.
#1. THE CIRCULAR FL OW MODEL IS A SIMPLIFI ED VERSION OF OUR ECONOMY. DESCRIBE HOW THIS MODEL WORKS FULL#
Since then, 22 more countries joined (and the United Kingdom left the EU in 2020) and a huge single market (also known as the ‘internal’ market) has been created and continues to develop towards its full potential. The result was the European Economic Community, created in 1958 with the initial aim of increasing economic cooperation between six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. The first steps were to foster economic cooperation: the idea being that countries that trade with one another become economically interdependent and so more likely to avoid conflict. The predecessor of the EU was created in the aftermath of the Second World War. The simplicity of the model allows those without formal backgrounds in economics to understand, at a high level, the economic activities that take place in an economy.The European Union (EU) is a unique economic and political union between 27 European countries. By grouping all individuals into households and firms and all markets into markets for goods and services and markets for factors of production, economists can model how dollars and resources flow back and forth among agents in the economy. To make sense of all of the different aspects of an economy, economists must make simplifying assumptions and generalizations in order to focus on only the most important economic ideas. However, no model can include every detail of a system as complex as an economy. Indeed, economies typically consist of millions of individuals interacting in many different ways. These simplifying assumptions allow scientists to focus on only the most important and generalizable components of the topic of study.Įconomists also make simplifying assumptions to focus on only the most important and generalizable aspects of the economy.
![1. the circular fl ow model is a simplifi ed version of our economy. describe how this model works 1. the circular fl ow model is a simplifi ed version of our economy. describe how this model works](https://venturebeat.com/wp-content/uploads/2020/02/qr.png)
Scientists of all types make assumptions in their models to simplify the complex world they are trying to describe. While simple, the circular-flow diagram can still be useful for the purposes of modeling how dollars and resources move throughout an economy. Which of the following is true regarding this economic model?Ī) Because it does not take into account the role of government, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy.ī) Because it does not take into account international trade, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy.Ĭ) While simple, the circular-flow diagram can still be useful for the purposes of modeling how dollars and resources move throughout an economy.ĭ) Because, in reality, the economy is very large, the simplicity of the circular-flow diagram makes it useless for the purposes of modeling how dollars and resources move throughout an economy.
![1. the circular fl ow model is a simplifi ed version of our economy. describe how this model works 1. the circular fl ow model is a simplifi ed version of our economy. describe how this model works](https://venturebeat.com/wp-content/uploads/2020/01/1b90a4a9-540a-4582-a54f-44eae7df1a04.png)
The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. The following diagram presents a circular-flow model of a simple economy.