Circular Flow of Economic Activity

Front

The ___________________ is a model economists use to show the relationships in the economy. Businesses and households are the actors in the economy who interact in the resource and product markets.

Back

circular flow diagram

Front

A simple economy is based on the interaction between two sectors: households and __________.

Back

business

Front

Businesses employ __________ from the households and purchase resources from the households to produce goods and services.

Back

workers

Front

Then ____________ purchase goods and services from the businesses with money they earned from selling their resources (including their labor).

Back

Households

Front

These individual interactions between households and businesses are the basis for _______.

Back

microeconomics

Front

In a more complex, open economy, the government and foreign economies also interact with both households and businesses. Governments collect revenue through _________ from households and businesses and then use the money to provide public goods and services.

Back

taxes

Front

The __________ includes households and businesses from around the world who purchase US goods and services (exports) and supply goods and services to US households and businesses (imports).

Back

foreign sector

Front

_____________ are the owners of the productive resources (factors of production) in the circular flow model.

Back

households

Front

Households are the ___________ of goods and services in the circular flow model.

Back

consumers

Front

Businesses (firms) are the consumers of the __________ (factors of production) in the circular flow model.

Back

factors of production