1. The Circular Flow of the U.S. Economy

2.  The U.S. economy is divided into three parts households, businesses and government.  Each of these parts rely on the others for certain things  The flow of money, products and services goes round in a circular fashion

4.  What the circular flow model tells us is that three basic elements of the economy will work and interact together to ensure that our needs and wants are provided for

5.  Each sector of the economy feeds another.  Households (consumers) provide businesses with payments in exchange for jobs and goods and services.  Government provides households and businesses with services and money in exchange for products and labor  Businesses provide the government with products, services and money in exchange for services and payment

7.  There are six goals in the U.S. economy 1.Economic Growth 2.Economic Stability 3.Economic Security 4.Economic Justice 5.Economic Freedom 6.Economic Efficiency

8.  Growth-If the country produces more, we can achieve a better standard of living  Stability- People want to eliminate periods of economic hardship. Everyone who wants a job can get one. Prices should not rise too dramatically  Security- People want to be sure they are protected in hard times. (unemployment compensation)

9.  Justice- The economic system should offer equal opportunity regardless of race, sex, religion or national origin.  Freedom- People have economic rights and freedoms. People can spend money as they choose and pursue their own career path  Efficiency- Strive to do the most with the resources available.

10.  In a pure free enterprise system things work without government interference  This is called the invisible hand of the market. Another way to look a it is to say the economy works because people act in their own self interest  When one sector of the economy acts in their own self interest it compels the other sectors to do the same

11.  1. Explain the circular flow of the U.S. economy?  2. How does this model show that the U.S. is a mixed economy?  3. How does the government interact with households and businesses?  4. Choose three of the six goals of the U.S. economy and explain them.  5. What is the invisible hand of the market?