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The Flow of Funds Model

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

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

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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 ...

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Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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