Discussion Forum Unit 1

This Discussion Assignment will help you better understand how the circular flow model
functions.

Proper circular flow of money through the economy is crucial for a healthy economy. 

 Please explain how interruptions to the flow of money may result in an economic
slowdown. 
 Please provide an example from a country of your choice.

Discussion Requirements
Your discussion should be at least 250 words, not more than 500. Cite your work and provide
references at the end. Once you’ve completed your initial post, be sure to respond to at least 3 of
your classmates' posts and rate them.

Refer to the UoPeople APA Tutorials in the LRC for help in APA citations.

Discussion Responses
You are responsible for responding to three classmates by providing comments, asking
questions, or having a conversation about their main post. Feedback should be appropriate,
meaningful, and helpful. For instance, refer to how your own experience supports/contradicts the
opinions developed by your peers. If you think they are too general or not rooted enough in
personal experience, you may ask for more detailed examples supporting these opinions. In
particular, ensure that the examples provided are correctly referenced and that you can access
them. Your comments should contribute positively to the conversation by broadening or
clarifying it. Feedback should be at least 3-4 complete sentences (at least 100 words).

Rating Discussions
 The instructor is the only person who knows which score matches the comment given to a peer.
Some classmates may worry that some peers will not provide a fair rating or be unable to provide
accurate corrections for grammar or other errors. It is the instructor’s responsibility to ensure
fairness and accuracy.

Discussion Forum Unit 1

The money it can be any quantity circulating in the economy is referred to as the flow of money.
Money flow is directly controlled by the country's central bank and is indirectly related to
interest rates. Money supply fluctuations are common when central banks continue to change the
money supply too quickly or too soon before the economy can respond. Because the flow of
money in the economy varies indirectly with interest rates (a higher money supply implies a
lower interest rate and vice versa), changes in money supply imply changes in interest rates,
making them highly volatile.
The circular flow of money depicts an economy made up of two groups: households and firms,
with two markets: the goods and services market, in which firms sell and households buy, and
the labor market, in which households sell labor to business firms or other employees (Greenlaw
et. al, 2011).
The circular flow of money connects producers and consumers. Producers pay for the services of
the factors of production with money, and the latter, in turn, pay the producers for goods. It is
believed that the smooth operations of the economy will always be disturbed by the leakages or
injections of money. Saving, for example, is a leakage from the expenditure stream. Saving more
money reduces the circular flow of money. Given the economy's money supply, this has a
deflationary effect on employment, income, and prices.
The major disruptions in the circular flow of money in Ethiopia are currency crisis, disruption of
payments for imports & exports, supply chain disruption, & financial crisis. Specially during
Covid-19 the currency crisis has impacted the circular flow of money in Ethiopia. In terms of
macroeconomic fundamentals, rising risk premiums and currency weakness will have an impact
on the Department's investment prospects (NCOP Finance, 2021).
Word Count: 299
References
Greenlaw & Shapiro, S. A. D. (2011). Principles of Macroeconomics (2e ed., Vol. 2). Timothy
Taylor. https://assets.openstax.org/oscms-prodcms/media/documents/Macroeconomics2e-
OP_WRQqkIv.pdf
NCOP Finance, (August 24, 2021). Economic impact of the recent unrest: National Treasury and
PBO Available at: https://pmg.org.za/committee-meeting/33438/