Economic activity is often modeled as a circular flow where income equals spending. I often have trouble with this model because it doesn't show that there are by-products of production and consumption. In my opinion, the model resembles a game of musical chairs. Each circle should get smaller and smaller not remain equal. To me, the circular flow shows that we are imploding as the law of entropy suggests.
Macroeconomists say that the economy is expanding as measured by the GDP. If the economy is expanding, why do I have such a hard time finding a parking place?
Economics is the dismal science. Economists only see the worst, but at least we know how to answer the question, "Is the glass half full or half empty."
The Production Possibilities Curve shows an increasing marginal cost when good X is produced. I guess that explains inflation.
Do you think that circular flow is just circular logic?
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