Households
What households supply to firms in the factor market.
Factors of Production (or Labor, Land, Capital)
What firms produce and sell in the product market.
Goods and Services
The market where households purchase consumer products.
Product Market
Compulsory financial payments collected by the government.
Taxes
The two simultaneous flows in the circular flow model.
Real Flow and Money Flow
The main source of income for most households.
Wages and Salaries
The total money received by firms from selling output.
Total Revenue
The market where firms hire workers and purchase resources.
Factor Market
Government spending on roads and schools is an example of an...
Injection
Money that leaves the circular flow (Savings, Taxes, Imports)
Leakages
Payments made by households to buy goods and services.
Consumer Spending
Calculated as Total Revenue minus Total Costs.
Net Profit
Who acts as sellers in the Product Market?
Firms
Pensions and social benefits paid without receiving goods in return.
Transfer Payments
Money that enters the circular flow (Investment, Govt Spending, Exports).
Injections
The leakage that occurs when households do not spend all their income.
Savings
Payment made by firms to households for using their land.
Rent
What determines prices in both factor and product markets?
Supply and Demand
Occurs when government spending exceeds tax revenue.
Budget Deficit
Condition when total planned leakages equal total planned injections.
Macroeconomic Equilibrium
The primary economic goal of households in the circular flow
Maximizing Utility
Business spending on new equipment and buildings.
Investment
The income earned from supplying capital.
Interest
Goods like national defense provided by the government.
Public Goods
What occurs when the total value of imported goods exceeds total exported goods?
Trade Deficit