Unit 5, Lesson 12 The Circular Flow Model

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Presentation transcript:

Unit 5, Lesson 12 The Circular Flow Model AOF Business Economics Unit 5, Lesson 12 The Circular Flow Model Copyright © 2008–2012 National Academy Foundation. All rights reserved. Copyright © 2008–2011 National Academy Foundation. All rights reserved.

The circular flow model Copyright © 2008–2011 National Academy Foundation. All rights reserved.

Households and individuals Households and individuals sell labor in the factor markets and buy products in the product markets. What are some resources you sell? Copyright © 2008–2011 National Academy Foundation. All rights reserved.

Firms Firms, or businesses, sell finished goods and services in the product markets and buy land, labor, and capital in the factor markets. Do you sell anything to a business? What do you sell? Copyright © 2008–2011 National Academy Foundation. All rights reserved.

Government The government collects taxes from both firms and individuals/ households; in return it provides public services. Do you think government belongs in the center of the circular flow? Why or why not? Copyright © 2008–2011 National Academy Foundation. All rights reserved.

Product markets Product markets are where firms, individuals and households, and government buy and sell goods and services. Name some products and services that are traded in the product markets. Copyright © 2008–2011 National Academy Foundation. All rights reserved.

Factor markets The factor markets are where firms, individuals and households, and government buy and sell the factors of production— land, labor, and capital. What factors may be traded in the production of buildings? Copyright © 2008–2011 National Academy Foundation. All rights reserved.

The circular flow model in action Copyright © 2008–2011 National Academy Foundation. All rights reserved.

The importance of the circular flow model The circular flow model shows how the individual actors in the US economy interact and depend upon each other to create a healthy economy. Copyright © 2008–2011 National Academy Foundation. All rights reserved.