Circular flow model

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Where do factors of production come from in the circular flow model?

Individuals

Resource Market

market for factors of production

Product Market

market for goods and services

Firms

offers goods/services for households to consume

Households

purchase/consume goods offered by firms

Circular flow model

represents how goods, services, and money moves through our economy

Market for factors of production (resource market)

-where firms purchase factors of production from households in exchange for (money, wages, or rent) -where households sell their factors of production to firms in exchange for money

Market for goods and services (product market)

-where households purchase goods and services from firms in exchange for money -where firms produce/sell goods and services to households in exchange for money

Which arrows represent the transaction between a landlord and a company?

4, 7

Point B on the Circular Flow model represents:

Businesses

Businesses provide government with...

Taxes

A person stocks shelves at a grocery store and receives a wage. They completed an exchange in which part of the model?

Factor Market

What are the four main parts of the circular flow diagram?

Factor Market, Product Market, Households, Firms

Economic Growth occurs when a nation's total output of ___ increases.

Goods

What does point A represent on the Circular flow diagram?

Product Market

Where does it take place?

Product Market & Resource Market

Someone purchases a car. This happens in which part of the model?

Product market

What drives the circular flow model?

Profit

What are the two main players?

households & firms


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