Below are examples of models that are built with ECF program. I think of Sweden when I design systems, but the numbers are only hypothetical for these examples.
The left side shows the payment flows. The right shows the corresponding real flows. Note that the real flows in the opposite direction toward the payments. Wages goes to households, work (s force) comes from households. The taxes go to the public sector, public services come from the public sector. Final consumption expenditure goes to private sector who supply goods and services to households.
Texts on orange background denote different calculation conditions. Löner_O and Löner_P signifies that the model expects 50 G $ (giga SEK = bn), respectively. 100 G $ as wage payments per year.
Now the question arises if you raise taxes from 50 GKR (gigakronor = billion) to say 55 G $ then what happens with the production of goods and services. The popular belief is that the economy tightens, ie production decreases. Another possibility is that the production of goods and services from the private sector is unaffected or even increased. What is probably happening is that the production performance redistributed from those who work in the private sector for those working in the public sector. Therefore face tax increases resistance from corporate employees, most bourgeois voters and appreciation of public employees, more left voters.
We export 60 billion and imports for 50 billion. It provides a financial saved abroad of SEK 10 billion, ie an export surplus.
With an import price of SEK 300 000 / produktmanår and an export of 500 KKR / pmy so we import more goods and services than we export, measured as work performed, while saving abroad. We can also consume more for the same payments, 100 billion / year in the case without foreign trade, model S1.
With the above figures it is clear that Sweden benefits from the trade. What happens in foreign countries, ie countries that export to Sweden? According to the theory of comparative advantage that also serves the trade. Take e.g. South Korea as lifting itself from a poor country into one of the world’s leading industrialized countries. I do not know how it happened with South Korea’s foreign debt. Maybe it’s finally the United States with its huge external debt “saved” system. The system has proven to be fragile. The financial crisis in the US in 2008 and the ongoing euro crisis shows how fragile the system is.