Circle And Flow Flashcards
Circle and flow model
Economic model that illustrates how money, goods, and services move between different sectors of an economy
Two primary factors
Households (US), businesses
Factor Market
Where households provide factors of production (land, labor, capital) to businesses in exchange for income (wages, rent, interest)
Production market
Where businesses sell goods and services to households in exchange for money
Flow of money
Money flows from households to businesses when purchasing goods and services and then flows back to households as wages and other payments for factors of production
Flow of goods and services
Goods and services provided by businesses flow to households in the product market
Mixed economy
Free market plus gov influence
Factor payment
Land=rent
Labor=wages
Capital=intrest
Transfer payment
Welfare and subsides
