Imagine you are a time traveller and you enter a small medieval village and find your way to the only inn. The innkeeper rents rooms for $10 a week, which you pay, as that is the exact amount of money you brought. The innkeeper promptly goes across the street and buys a new pair of shoes (which were just being finished) from the cobbler for $10. Later the same day, the cobbler purchases a new bridle and a set of horseshoes (just produced) from the stable master for, again, $10. Right at the end of the day the stable master buys a year's supply of candles (freshly produced) from the candle maker for, of course, $10. These are the only economic transactions in the whole village on that particular day.

What were the total expenditures? What was the total income earned? And finally, what stock of money was used to generate this income flow?

What is the relationship between production, expenditures, and income?

What comes first: production or expenditure? And is it conceivable, for instance, to have income and production, but no expenditures?