circular flow model business government individuals investors government consumer product markets...
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Circular Flow Model
Business Government Individuals
Investors Government Consumer
Product Markets
Resource Markets
Financial
Marginal- additional, MB= Marginal Benefit, MC= Marginal Cost, MR- Marginal Revenue, MRP- Resources produced, MRC- Resource cost,MSB- Marginal Social Benefit, MSC- Marginal Social Cost
Circular Flow Model
Business Government Individuals
Investors Government Consumer
Product Markets
Resource Markets
Financial
Goods and Services Goods and Services
SpendingRevenue
Resources- factors of productionLand Labor capital entrepreneurship
Resources- factors of production
Cost
Income
Goods and Services
Gov’tSpending
Resources and labor
Gov’tSpending
Taxes and loansTaxes
Subsidies Transfer Payments
Public Goods/Services Public Goods/Services
Supply Demand
SupplyDemand
Marginal- additional, MB= Marginal Benefit, MC= Marginal Cost, MR- Marginal Revenue, MRP- Resources produced, MRC- Resource cost,MSB- Marginal Social Benefit, MSC- Marginal Social Cost
MB= MCUtility Maximization
MR= MCProfit Maximizing Rule
(MC) S= D (MB) or (MR)
Profit maximizing rule of hiring MRP= MRC
Loans
Interest
Consumers+
Investors+
Government+
Net Exports__________
Gross Domestic Production
MSB= MSC
If you think of the Circular flow model as a machine then consider what can speed it up and what can slow it down. In other words what acts like and brake and what acts like a gas pedal.Also what can put the machine “out of gear?”
Laws Government Economic Policies Taxes/tax cuts Subsidies
Price Controls
Interest rates
Government
An increase or decrease of spending (fiscal policy)
The Federal Reserve and the Banks
Willingness to lead
The Budget
Monetary Policy
Business
Types of competition Price Gouging Investing
Households
Hiring Confidence
Confidence Are we buying? Employment
Inflation
Regulation
Think about a big tub of water carried by four people.
Circular Flow Model
Business Government Individuals
Investors Government Consumer
Product Markets
Resource Markets
Financial
Goods and Services Goods and Services
SpendingRevenue
Resources- factors of productionLand Labor capital entrepreneurship
Resources- factors of production
Cost
Income
Goods and Services
Gov’tSpending
Resources and labor
Gov’tSpending
Taxes and loansTaxes
Subsidies Transfer Payments
Public Goods/Services Public Goods/Services
Supply Demand
SupplyDemand
Marginal- additional