Economic Flow

We Buy Stuff Households Firms Represents all consumers. Economic Flow They Sell stuff We Buy Stuff Products Consumer expenditure Households Firms Represents all consumers. The people that work and buy goods/services Represents all businesses.

How do households get money? How do firms make products? Economic Flow Products Consumer expenditure Households Firms How do households get money? How do firms make products?

We sell our human resources Economic Flow Products Consumer expenditure Circular Flow Model Households Firms They Pay us to work We sell our human resources Wages, rent, dividends Resources

Households Firms Products Resources Taxes Taxes Economic Flow Consumer expenditure Households Firms Wages, rent, dividends Resources Taxes Taxes

Does the government suck money out of the cycle through taxes? NO

Does the government suck money out of the cycle through taxes? firms schools households police

Does the government suck money out of the cycle through taxes? firms households

Circular Flow Model Households Firms Economic Flow Products Consumer expenditure Tax dollars eventually go back to households. The households then spend the money at firms. Firms then pay households. And so on… Circular Flow Model Households Firms Wages, rent, dividends Resources Taxes Taxes

Firms -Buy: Resources from Households -Sell: Products to Households Households -Buy: Products from Firms -Sell: Resources to Firms Banks -Accept Deposits: Households earn interest -Loan: To firms to expand business Gov’t -Taxes: redirect money in the economy