Question 1
Purchasing the South African manufactured T-shirt contributes to the local economy
by stimulating the circular flow of income as an injection. According to the circular
flow model, households spend money on domestically produced goods and services,
which increases the income of firms and, consequently, the overall economy. When
consumers buy local products, they inject funds into the economy, leading to
increased production, employment, and national income. In contrast, buying the
USA-made T-shirt would represent a leakage, as the funds would flow out of the
South African economy, reducing its economic growth.
First, buying international items increases the cost of goods due to import taxes and
transportation costs. Such costs could have been avoided if the individual had opted to buy
local items. Additionally, buying international items deprives the local economy of revenue
generated from local businesses, leading to lost employment opportunities and reduced
economic growth. Further the quality of imported goods may not always be superior to locally
produced ones. Often, local producers are able to offer products that are of a similar or even
higher quality than imported goods, and at a lower cost.
QUESTION 2
int
i1
i0
M1 M2 M
Purchasing the South African manufactured T-shirt contributes to the local economy
by stimulating the circular flow of income as an injection. According to the circular
flow model, households spend money on domestically produced goods and services,
which increases the income of firms and, consequently, the overall economy. When
consumers buy local products, they inject funds into the economy, leading to
increased production, employment, and national income. In contrast, buying the
USA-made T-shirt would represent a leakage, as the funds would flow out of the
South African economy, reducing its economic growth.
First, buying international items increases the cost of goods due to import taxes and
transportation costs. Such costs could have been avoided if the individual had opted to buy
local items. Additionally, buying international items deprives the local economy of revenue
generated from local businesses, leading to lost employment opportunities and reduced
economic growth. Further the quality of imported goods may not always be superior to locally
produced ones. Often, local producers are able to offer products that are of a similar or even
higher quality than imported goods, and at a lower cost.
QUESTION 2
int
i1
i0
M1 M2 M
