Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.

Slides:

Advertisements

Similar presentations

Circular Flow of a Market Economy

Advertisements

Warm-Up/Review What is the difference between GDP/GNP? What are the two methods for measuring each? List the 3 Macroeconomic goals. What is the main purpose.

The Circular Flow Model

Vocabulary Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly. Factor Market-

Session 3 Circular Flow Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of.

A Circular Flow Diagram

Chapter 2 homework Numbers 4, 8 and 12 Comparative Advantage Problem Now…the multiple choice answers.

1 Private Sector Circular Flow. 2 Private and Public Sectors Private sector: households, businesses, & the international sector. Household spending 

How money changes hands!.  In the Circular Flow Model there are 2 groups:  Households (the people)  Firms (companies and businesses)

Activity 43 the factor market Determining the prices and quantities of inputs necessary for production.

 Product Market: This market consists of households/individuals/ consumers  Resource/Factor Market: consists of businesses/firms who produce goods and.

The Circular Flow Spending Goods and services bought Revenue Goods and services sold Labor, land, and capital Income = Flow of inputs and outputs.

Circular Flow Chapter 2-3.

The Simple Circular Flow Model

Circular Flow. Notice that goods & services and resources flow around the economy in one direction, while money flows around the economy in the opposite.

Circular Flow Model The Circular Flow Model describes and captures how the economy interacts with one another!!!

Chapter 8 The Circular Flow Model © 2003 South-Western College Publishing.

Objectives Analyze a circular flow model of a pure market economy.

Gross Domestic Product (GDP)– market value of all final goods and services produced in an economy during a given period, usually a year. In 2009, the GDP.

Product and Resource Markets

Lesson 6 Microeconomics.

Circular Flow Diagrams

Circular Flow in Economics

Alomar_1111 Chapter 7: Measuring Domestic Output, National Income, and Price Level.

Learning Objectives: Measuring the Economy LO1: Understand the circular flow of national income LO2: Explain the concept of equilibrium and why national.

The Market System and the Circular Flow 2 C H A P T E R.

Macroeconomics 203 The Circular Flow. Circular Flow Model It is a model of the economy that shows the circular flow of expenditures and incomes that result.

Modeling the Economy. Actors: 1. Consumers 2. Financial Institutions 3. Businesses 4. The Government 5. The Foreign Sector.

How money and goods flow in a Market Economy. What is a Market? A market is an arrangement that allows buyers and sellers to exchange things.

Circular Flow Lesson 2, Activity 5 1. Give three examples of resource owners. Answers will vary, answer can be anyone who has land, labor, capital or entrepreneurship.

Unit 5, Lesson 12 The Circular Flow Model

Economic Activity and Productivity. To the economist, a market is a location or situation where buyers and sellers exchange an economic product Markets.

The Circular Flow of the Economy: Copy the chart below onto your paper, then place the terms on the next slide in the appropriate place.

Copyright © 2006 Thomson Learning 2 Thinking Like an Economist.

A SIMPLE ECONOMY – the 1800s SECTORSUSE NOWIGNORE FOR NOW Households Businesses Government Foreign Households Businesses Government Foreign TYPES OF SPENDINGUSE.

The Circular Flow Model describes and shows how the economy interacts.

Economic Activity and Productivity

Households What are “Households” in terms of the Circular Flow of the Economy? PEOPLE Workers Land Owners Investors Renters Home Owners Families You &

Unit 1-5: Basic Economic Concepts 1. The Circular Flow Model The Product Market- The “place” where goods and services produced by businesses are sold.

Click to add text The Circular Flow of Income By David Anthony Siddall.

Circular Flow Model Economists use the circular flow diagram to illustrate the basic mechanics of an economy and to illustrate the basic function of markets.

Principles of Macroeconomics ECON203, Lecture 2: A Measure of Production and Income (GDP) Instructor: Turki Abalala.

The Circular Flow Model Where does your money go?

The Circular Flow Households. The Circular Flow Households Land, Labor, Capital.

AP MACROECONOMICS INTRODUCTION. MACROECONOMICS Macroeconomics is the study of the economy as a whole. Microeconomics is the study of individual parts.

& The Circular Flow of Economics The 3 Economic Questions.

Circular Flow Diagrams Economists use the circular flow diagram to show the high degree of economic interdependence in our economy. Money flows in one.

Circular Flow Chart of a Pure Market Economy ©2012, TESCCC.

Economic Activity and Productivity. To the economist, a market is a location or situation where buyers and sellers exchange an economic product Markets.

Economic Activity 8.03 Explain the circular flow of economic activities and how interactions determine the prices of goods and services. Part-time workers.

 Circular Flow Model. MEANS OF PRODUCTION: used to produce goods & services  FACTORIES  FARMS  SHOPS  MINES  MACHINERY  OFFICE BUILDINGS.

OPENING Describe what you believe microeconomics will cover in 2 sentences.

Circular Flow Diagram Macroeconomics. Our First Model: The Circular-Flow Diagram The circular-flow diagram is a visual model of the economy that shows.

Circular Flow Diagrams

Circular Flow Model & Business Cycle Model ***Back to Macro!***

Circular Flow of the Economy

Unit 1: Basic Economic Concepts 1.5 Circular Flow Diagram

Vocabulary Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly. Factor Market-

Professor Lowenberg Office: JH 4238 Phone: anton

Mr. Mayer AP Macroeconomics The Circular Flow of Economic Activity

Vocabulary Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly. Factor Market-

Circular flow SSEMI1.

Thinking Like an Economist

The Circular Flow of Economic Activity

Unit 3: Supply, Demand, and Consumer Choice

The Circular Flow Model

CIRCULAR FLOW DIAGRAM.

The Role of Households & Businesses The Matrix

How are you able to buy the things you want and need?

Presentation transcript:

Understanding the circular flow of income

HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer Purchases Productive Resources L. L. C. E. Goods & Services The product market The factor market

1. Give three examples of resource owners

2. Define a business firm

3. What is the product market?

4. Give three examples of transactions you made this week in the product market:

5. What is the factor market?

6. Give an example of a transaction you or your family made this week in the factor market: 1. 2.

7. How are business firms connected to the factor and product markets?

8. How are households connected to the factor and product markets?

9. Where do resource owners get the money to buy goods and services in the product market?

10. Where do business firms get the money to pay resource owners for their land, labor, capital and entrepreneurship in the factor market?

11. Why is it important to know that a market economy is characterized by interdependence?

HOUSEHOLDS SELL, LOAN, LEASE, RENT THE FOUR FACTORS OF PRODUCTION TO BUSINESS FIRMS HOUSEHOLDS receive income from selling productive resources to firms, which allows them to purchase final goods and services

Business firms sell finished goods to households BUSINESS FIRMS earn income from selling products to households, which allows them to purchase productive resources

12. What determines the prices of land, labor, capital and entrepreneurship in a factor market?