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The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.
The model structure basically helps in understanding how the flows are connected from a behavioral perspective or in simple words how the behavior of a sector affects the flow of funds in the system, e.g., the factors that affect the consumption (C) of the household is not clear from the flow of funds but can be explained by the model.
A cash flow (CF) is determined by its time t, nominal amount N, currency CCY, and account A; symbolically, CF = CF(t, N, CCY, A). Cash flows are narrowly interconnected with the concepts of value, interest rate, and liquidity. A cash flow that shall happen on a future day t N can be transformed into a cash flow of the same value in t 0.
Discounted cash flow valuation Gordon model John Burr Williams (November 27, 1900 – September 15, 1989) was an American economist , recognized as an important figure in the field of fundamental analysis , and for his analysis of stock prices as reflecting their " intrinsic value ".
In financial accounting, a cash flow statement, also known as statement of cash flows, [1] is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities. Essentially, the cash flow statement is concerned with ...
Influenced by Keynes, economics texts in the immediate post-war period put a significant emphasis on balance in trade. For example, the second edition of the popular introductory textbook, An Outline of Money , [ 41 ] devoted the last three of its ten chapters to questions of foreign exchange management and in particular the 'problem of balance'.
A flow variable is measured over an interval of time. Therefore, a flow would be measured per unit of time (say a year). Flow is roughly analogous to rate or speed in this sense. For example, U.S. nominal gross domestic product refers to a total number of dollars spent over a time period, such as a year. Therefore, it is a flow variable, and ...
Financial economics studies how rational investors would apply decision theory to investment management.The subject is thus built on the foundations of microeconomics and derives several key results for the application of decision making under uncertainty to the financial markets.