1. Circular Flow of the Economy
AP Macro
Dual Credit Macro

2. Markets-mechanisms that allow for buying and selling
Factor Markets-productive resources are bought and sold.
Product Markets-producers sell goods/services to consumers.
Recently markets have evolved into cyberspace, with buyers and sellers interacting through computers without leaving their homes.

3. Circular Flow Concepts
Product Market – where goods and services are exchanged
Households – suppliers of the factors of production
& demanders of goods and services
Government – providers of public goods and services &
demanders of both private goods and services
and the factors of production
Businesses / Firms – suppliers of goods and services
& demanders of the factors of production
Factor Market – where the factors of production
are exchanged

4. <<<<Goods and Services <<<<
Product Market
<<<<Goods and Services <<<<
>>>$ Household Spending $>>>
<<<goods & services<<<
<<<public goods<<<
>>$ government spending $>>
>>$ taxes $>>>
>>>public goods>>>
>>>factors of production>>>
<<$ taxes $<<
<<$ factor payments $<<
Households
Government
Businesses / Firms
<<<$ Rent, wages, interest & profits $<<<
>>>> Land, labor, capital & entrepreneurship >>>>
Factor Market

5. Circular Flow Diagram
This diagram illustrates the flow of goods/services and money in a market system.
In a market economy-consumers and businesses answer the what, how and for whom to produce questions. Other terms include, capitalism and mixed or free market economy.

6. Circular Flow of the Economy
Individuals
Factor Markets
Industry
Product Markets
Govt