Loading...

Start at the Beginning?

You have entered this tutorial part way through. Click the Restart Tutorial button above to jump to the first page.

Please Use a Different Browser if Possible

This application may be broken or have performance problems and missing functionality on your current browser.

If you are using Internet Explorer 6, 7, or 8, installing Google Chrome Frame is one solution.

Click Yellow Text Boxes (1, 2, 3, etc) to see Animations

Because you declined step-by-step narration, you'll need to activate animations manually.

(Note: not all numbered steps have animations.)

NOTE:

This visualizer does not yet show how sectors dynamically react to changes in flows by altering other flows!

For example, if GDP falls then other changes may occur that are NOT currently triggered in the visualizer:

  • Government spending typically rises (due to additional safety net payments).
  • Business investment typically falls (lower forecasted demand requires less capacity).
  • The savings rate often rises (if households save more as a precaution, or pay down debt faster).
  • Taxes may fall faster than a flat leakage % would predict (due to marginal tax bracket effects, etc).

Example: reducing government spending might not reduce the deficit, despite current appearances in this visualizer.

Don't show this note again.

Font Size Tip

The + and - buttons only increase the font size in the sidebar and above and below the diagram.

The diagram and text within it stretch to fit within the browser window, so make your browser window as large as possible. Tip: the shortcut for full screen is F11 on Windows.

Flow Animations Unfinished:

The flow animations currently only illustrate the macroeconomic circular flow concept in a general way. Limitations:

1. The magnitudes of the animated flows do not yet correspond to the magnitudes of the leakages and injections as controlled in the sidebar.

2. The inject once demo doesn't work properly yet, but it does let you see roughly how the core flow diminishes over time (lost to the leakages) when there are no ongoing injections.

What Next?

The step-by-step narration has completed playing for this page.

The yellow information boxes that were just read aloud sequentially now all appear on the diagram.

Choices of next action:

  • Click individual yellow text boxes with [?]s to see additional details in the right margin.
  • Read extra information in the right margin about the page's concepts, and view charts, etc.
  • Click the "Next >" button at the top of the page (or push right arrow on your keyboard) to progress to the next page.
  • Click the green Play button below to repeat sequential narration of this page.

Tip: Concepts

Hover over conceptual phrases highlighted in yellow to visually locate them in the diagram.

(temporarily hidden — click to expand)
Macroeconomic Circular Flow Visualizer (BETA)

Macroeconomic Circular Flow Visualizer — Try the Interactive Controls (BETA)

For a step-by-step introduction, visit How the Economy Works — A Visual Tutorial

Injections ($):

Leakages (%):


Derived Values:

Nominal GDP: (not inflation-adjusted)
Spending Multiplier: [?]

Animation Controls:

Inject Once:

More information...

Sorry, no extra details are available for the currently selected text box in the diagram.

Theoretical Foundations of this Tutorial

Most of the concepts shown here will be familiar to anyone with a knowledge of mainstream macroeconomics. However, the field of macroeconomics has multiple schools of thought, and they disagree with each other on some topics.

This tutorial's content is most influenced by a branch of economics sometimes referred to as Modern Monetary Theory (MMT) or neo-Chartalism, a part of the larger heterodox Post-Keynesian school. Here are some of its characteristics:

  • It is rooted in a deep knowledge of the modern operational realities of our economic systems (the banking system, the Federal government, etc).
  • It incorporates the standard accounting practices (double-entry bookkeeping) that businesses and governments use every day and is logically stock-flow consistent.
  • It has been around for decades, yet only since the global economic crisis has this branch of economics really begun to achieve wider-spread recognition, largely because of how well it explains recent economic history.
  • It cleanly separates politics from economics. The concepts covered here are equally compatible with political choices favoring either large or small government.
  • It recognizes the importance of focusing on flows of net worth within the economy rather than just focusing on quantities of individual asset types in isolation, and it models all financial assets (including money) as the dynamic liabilities that they are, rather than as if they were commodities.

Bibliography and Links

Sources for additional information on these topics:

More Information about the Macroeconomic Circular Flow Visualizer

This is a work in progress.

Possible Upcoming Features:

  • Enhanced Scenario Modeling
    • Built in (but configurable) reaction functions between flows — for example a fall in GDP could trigger a rise in government spending due to safety net payments, a fall in investment due to less optimistic sales outlooks, a precautionary rise in the household savings rate, etc.
    • Built in modeling and visualization of macroeconomic capacity (level of unemployment, idle factories, etc).
    • Visualization of changes in GDP that are nominal versus real — i.e., show how capacity is a constraint and inflation accelerates when demand rises at full capacity.
    • Visualization of changing macroeconomic stocks (quantities) such as government debt, and related ratios such as government debt/GDP.
    • Further decomposition and illustration of dynamics between finer-grained sectors (debtor households, creditor households, businesses, etc) including changes in private sector debt.
  • Real World Data
    • Time-animated visualization of real economic data tracking the US economy (and other countries) during important historic episodes.
    • Drill-down from aggregate flows into component flows (e.g., click on "investment" flow to see fixed investment (residential & non-residential), change in inventories, etc).
  • Enhanced Visualization & Presentation
    • Have the graphical flow animations convey visually the relative sizes of the actual flow quantities in the model.
    • Visualization of flow differentials (e.g., economic growth since last time period), i.e., not just total flows.
    • Graphs floating in the diagram next to the flows to show changes over time.
    • Embellishment like animations showing movement between employment and unemployment.
    • Narrated page overview for newcomers — an annotated step-by-step guide explaining how to use the page.

Other Tutorials and Visualizations:

Visit the EconViz home page to browse the choices.

Stay informed of future updates by subscribing to the EconViz blog.

Feedback:

You can submit feedback via any of:

  • Private in-page comment form ("Submit Page Feedback" link in the bottom left corner).
  • Public comments thread ("# Comments" link in the bottom left corner).
  • Email to hbl { at } econviz { dot } org.

Tip Jar:

  Has this visualizer helped you? Your donation will contribute to the macroeconomic circular flow!

Auto-narrate?
Audio:
Page Playback Control Bar
Hide text boxes during narration?
seconds delay between steps
NOTE: This tutorial is an evolving work in progress, but is open to visitors!

Use Voice Narration?

Recommended. Explains one thing at a time.

All page content visible at once. Less animation.