ZHANG Xianzhen,etc:Circulation, Production and Consumption: An Equilibrium Analysis Based On a Closed Economic System with 3-Sectors

Abstract  As the key link between production and consumption, circulation ensures smooth operation of social economy. In this paper, we construct a closed economic system with 3-sectors of production, consumption and circulation, portray its dynamic process initially, and analyze the effect of relevant parameters on equilibrium solution. The model shows that technical progress in production and circulation departments, as well as reducing the loss of commodity in circulation process, can not only promote economic growth, but also to some extent curb inflation. But institutional costs and monopoly pricing in circulation may crowd out investment, jack up prices, reduce the actual purchasing power of wages, depress the final output of society, and widen the gap between rich and poor.

Key words： Circulation      Production      Consumption      3-Sectors

Source: Finance & Trade Economics , No.8, 2014