1. 6.1 – Circular Flow of Income
Identify the Circular Flow of Income

2. I. Circular Flow of Income
Factor Market- where businesses buy factors of production from households
1. Households earn income from selling land, labor, and capital
Factor market: Incomes
Businesses
Households

3. Circular Flow of Economic Activity
Product Market- business supply goods and services for sale to households
Households return money to businesses by buying from firm
Factor market: Incomes
Circular Flow of Economic Activity
Businesses
Households
Product market: Expenditures

4. What kind of Economy does the US have?
The US was based on a free market economy but the US government (over time) has intervened to keep order, regulate, provide services and promote general welfare
Technically its a Mixed-Economy because… individuals, companies and the government decide what gets produced

5. In a mixed economy, the government also plays a role
Individuals and businesses pay taxes to the government
The government uses that money to regulate the economy, make public works, and provide entitlements
Factor market: Incomes
Entitlements and Services
Taxes and Fees
Regulation
Taxes
Businesses
Households
Government
Product market: Expenditures

6. Draw It!