5 Sector Model (Commerce)

• Saving: the leakage in the Financial Sect
• Investment: the injection in the Financial Sect
• Taxation: leakage in the Government Sect
• Government Spending: the injection in the Government Sect
• Imports: the leakage in the Overseas Sect
• Export: the injection in the Overseas Sect
• Leakage: money coming out of the economy
• Injection: money flow into the economy
• Income: the Firms Sect provide for the Household Sect
• Resources: the Household Sect provide for the Firms Sect
• Economic growth: when the sum of all leakages in the economy is less than the sum of all injections - the increase in the flow of money through the economy will lead to economic growth
• Economic decline: when the sum of all leakages in the economy is greater than the sum of all injections - the decrease in the flow of money in the economy will lead to economic decline
• Equilibrum: when the sum of all leakages in the economy is equal to the sum of all injections - the flow of money in the economy will remain the same, leading to a state of equilibrum
• In order for a nation to flourish and for its citizens to become wealthy, it is expected that an economy should "grow" every year. Each year, an economy should be "bigger" than it was the previous year. In realtion the circular flow of income, growth occurs when more money is moving around the economy.
• The circular flow model shows how money flows between sectors within an economy over time. It can also show what happens if there are changes or disruptions to this flow.
• Household Sector: the sector is made up of individual in the economy
• Firms Sector: the sector is made up of all businesses in the economy
• Financial Sector: the sector that made up of banks and other financial institutions in the economy
• Government Sector: the sector is made up of all bodies in national, state and local governments
• Overseas Sector: the sector relates to Australia's trade with other nations
• An economy is the system for deciding how scarce resources are used so that goods and scervices can be produced and consumed.
• Resources are seen as scarce because we have unlimited wants but there are not enough resources the goods and services to satify the want
• Commerce is an important branch of business, it refers to the purchasing and selling of goods and services in exchange for money or in kind
• Trade is buying, selling and exchanging goods
• E-commerce is all business activities carried out online
• Industry: a group of companies that are related based on their primary business activities