ABSTRACT
This chapter deals with the four sectors: consumers, businesses, the government and foreign countries. Expenditure is also referred to as the demand side of the economy. Economic agencies often predict both long-term and short-term changes in consumption on the basis of income developments. The marginal consumption ratio gives an indication of how much of every extra euro earned is consumed. Consumption growth is also dependent on two other factors, both of which have a small effect on consumption: real interest and capital increase. Export developments are influenced by two types of factors: the state of the global economy and the competitive position of industry. Economic agencies often predict both long-term and short-term changes in consumption on the basis of income developments. A circular flow of income represents the cash flows between the various sectors during a certain period of time.
