Using the Factors of Production Circular Flow Using the Factors of Production

Working Economy Individual markets must all fit together Households- own the resources of production They must sell those resources to the business in exchange for income

Business Sector They buy the factors of production from households, produce goods, and sell the finished product back to the household for revenue This cycle is continuous and essential for market survival

Financial Institutions Form a link between savers and investors Households place remaining income in financial institutions, which is then loaned to businesses for investment Financial Institutions serve as an intermediary in the circular flow model

The Government’s Role Collect taxes and provide public goods that private business can’t provide Provided protection and security from the government contributes to circular success

Government Tax Reliance Local- property State- sales and income Federal- income and social security