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The Flow of Funds Model

Define the flow of funds model and explain each component, including how funds flow from savers to producers.

Your response should be 250 words in length.

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The flow of funds model shows the flow of funds from the savers to producers. When households earn an income they spend less each year than they receive in income. The portion of the household income not used to buy goods and services or to pay taxes is called savings. The savings reach the financial markets. The economy has a set of institutions that are called financial markets. These include banks, insurance companies, pension funds, mutual funds, and financial ...

Solution Summary

The Flow of Funds Model is explained in a structured manner in this response. The answer includes references used.