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Circular Flow

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27 views8 pages

Circular Flow

Uploaded by

deyana04
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Circular Flow Diagram

Transactions: The Circular-Flow


Diagram
Trade takes the form of barter when
people directly exchange goods or
services that they have for goods or
services that they want.

The circular-flow diagram is a model


that represents the transactions in an
economy by flows around a circle.
The Circular-Flow Diagram
Circular-Flow of Economic
Activities
A household is a person or a group of people that
share their income.

A firm is an organization that produces goods and


services for sale.

Firmssell goods and services that they produce to


households in markets for goods and services.

Firms buy the resources they need to produce—


factors of production—in factor markets.
The Circular Flow

Wages, rents,
interest, profits

Factor services

Goods
Household t Firms
n n
me (production)
v er
Taxes Government Go ending
Savin Sp tm e nt
gs Financial markets Inves
Imp
orts Personal consumption rt s
Ex po
Other countries

McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.


Growth in the U.S. Economy
from 1962…
…to 1988

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