kiertokierteen

Kiertokierto, also known as the circular flow of income, is an economic model that illustrates the continuous movement of money, goods, services, and factors of production among the main sectors of an economy. The classic diagram divides the economy into households, businesses, government, and foreign markets, showing how each sector interacts through two primary channels: real transactions and financial transactions.

In the real sector, households supply labor and other resources to firms and receive wages, rents, and profits in return. Firms use these resources to produce goods and services, which households purchase with their income. Governments collect taxes, provide public goods and services, and redistribute income through transfers, thereby influencing both real production and monetary flow. The foreign sector engages in imports and exports, affecting the domestic supply chain and external balance.

Financial intermediaries, such as banks and markets, play a pivotal role in transmitting money between savers and investors, facilitating investment and consumption. The net effect of these interactions is a continuous, cyclical flow that sustains economic activity, determines prices, and modulates economic cycles.

Economists use the kiertokierto framework to analyze income distribution, macroeconomic equilibrium, and policy impacts. While the model simplifies complex realities, it remains foundational for understanding how economies operate and how shocks propagate through various sectors.