Circular Flow of Economic Activity

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. 

• circular flow diagram

• gross domestic product

• consumer price index

• entrepreneurship

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

• technology
• education
• government
• business

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

• workers

• capital
• technology
• land

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

• Corporations
• Governments
• Non-profit organizations
• Households

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

• microeconomics

• political activity
• social interactions
• financial transactions

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.

• subsidies
• tariffs
• taxes
• loans

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). 

• foreign sector

• domestic market
• government

• global economy

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

• businesses
• governments
• consumers
• households

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

• producers
• suppliers
• distributors
• consumers

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

• factors of production
• government
• financial markets
• goods and services