2.3. The Circulation of Money
An Essay on Economic Theory · Mises Institute
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Show Notes
Farm production produces three rents, one of which sustains the farm workers, while the other two can be sold at wholesale to entrepreneurs who in turn provide property owners and farmers with goods and merchandise. This is the circular flow model of the economy. Money facilitates the flow and timing of rent payments (i.e., “velocity”) and the rate of the monetary flow determines the ratio between the quantity of money and the value of annual production. This model is then used to explain the implications of international trade.
From Part 2: Money and Interest. Narrated by Millian Quinteros.