Flow of Money
This is when households spend money on products
Expenditures
Natural, Human, Capital, and Entrepreneurship
What do households demand in the product market?
Finished Goods
What do businesses demand in the resource market?
The Factors of Production
What are the two groups involved in the circular flow?
Households and Businesses
This is when households received money for working
Income
What is the most common resource used in the circular flow
Labor (Human Resource)
What do businesses supply in the product market
Finished goods
What do households provide in the resource market?
The Factors of Production
The outer circle of the circular flow represents...
The flow of money
This is when businesses receive money from selling a product
Revenue
What do businesses do with resources?
Make products
Who is the consumer in the product market?
Households
Who is the consumer in the resource market?
Businesses
The inner circle of the circular flow represents...
The flow of resources
This is when businesses pay their employees
Wages
What is the difference between supplying a product and selling a product
Supplying makes the product available for purchase; selling it means it has been purchased.
Who is the producer in the product market?
Businesses
Who is the producer in the resource market?
households
I can't think of another question, so here's a fun one: Where did Mr. B travel this summer?
China
What are the dangers of high inflation or people not earning money?
They both threaten to eliminate expenditures and revenue, meaning that businesses cannot pay their employees or earn a profit.
They both threaten to take away the factors of production from businesses, meaning that they cannot produce goods and services or make money
Explain the entire relationship that occurs in the resource market
Households supply resources, and businesses use them to make a product; businesses give out wages, and households earn income.
Why is circular flow so important to understand in economics?
It is the foundation of economic growth. It's how I buy things and how I earn money