SOL 12d,e Circular Flow Guided Notes

SOL 12d,e Economic or Circular Flow

Economic or Circular Flow

Resources, goods and services, and money flow continuously among households, businesses, and markets in the United States economy. Goods, services, and resources flow in one direction. Money flows in the opposite direction. Consumers (households), businesses (producers), and markets interact in an economic flow or circular flow or cycle.

Multiple Select

What flows continuously among households, businesses, and markets in the United States economy?

• money

• goods

• services

• resources

Multiple Select

Consumers (households), businesses (producers), and markets interact in an ___ or_____ or cycle.

• economic flow

• circular flow

• money flow

• scarcity

Economic or Circular Flow

Consumers (households) in the United States own the many different kinds of resources that are used in production. They sell these resources to businesses and use the money they make (income) to purchase products made by businesses.

Multiple Choice

______ (households) in the United States own the many different kinds of resources that are used in production. They sell these resources to businesses and use the money they make (income) to purchase products made by businesses.

• consumers

• producers

• executives

• agents

Multiple Choice

What do consumers do with the income they earn?

• purchase products made by business

• scarcity

• burn it

• give it away

Economic or Circular Flow

Businesses (producers) buy the resources available in the marketplace.  They then use these resources to make products which they sell to consumers, other businesses, and the government.  The profits made by the businesses are then used to buy more resources.

Multiple Choice

What do businesses do with the resources they purchase in the marketplace?

• make products

• save it

• spend it

• invest it

Multiple Choice

What are the profits made by businesses used for ?

• to buy more resources

• to buy property

• to buy scarcity

• to buy gold

Economic or Circular Flow

Consumers and businesses spend money and the income is used by households to purchase goods and services and by producers to purchase resources.

Economic or Circular Flow

Government also plays a role in this economic cycle by taxing consumers and businesses. They then use this tax revenue to provide public goods and services.

Multiple Choice

What role does the government play in the economic cycle

• taxing

• borrowing

• spending

• saving

Multiple Choice

What does the gov do with tax revenue?

• provide public goods and services.

• provide free cable and cell services.

• provide internet and cable services.

• provide money and housing services.

Economic or Circular Flow

Consumers and businesses use their savings and financial investments to provide financial capital.  This financial capital can be borrowed from financial institutions by people or business owners to help businesses expand and grow.

Economic or Circular Flow

Private financial institutions, such as banks and credit unions receive deposits and make loans. These financial institutions encourage saving and investing by paying interest on deposits.  Financial institutions help to facilitate, or enable an exchange of money between savers and borrowers.

Multiple Select

Some examples of private financial institutions include?

• banks

• credit unions

• malls

• supermarkets

Multiple Select

What do private financial institutions do?

• make loans

• receive deposits

• spend money

• sell stuff

Multiple Choice

How do financial institutions encourage saving and investing?

• by paying interest on deposits

• by paying interest on withdrawals

• by paying interest on loans

• by paying interest on surcharges

Multiple Choice

What role do private financial institutions play between savers and borrowers?

• facilitator

• playmaker

• assistance

• supervisor