Circular Flow Rio Hondo College循环瑞航德学院.ppt

Circular Flow Chapter 2-3 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. Firms sell 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 Growth in the U.S. Economy from 1962… …to 1988 Goods Other countries Financial markets Government Firms (production) Household Taxes Factor services Savings Imports Government Spending Wages, rents, interest, profits Exports Investment Personal consumption McGraw-Hill/Irwin ? 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. * *