Circular Flow of Economy

What is the Circular Flow of Economy?

• A way of summarizing social interactions

• A way of summarizing scientific discoveries

• A way of summarizing economic transactions

• A way of summarizing political events

What is a HOUSEHOLD in the Circular Flow of Economy?

• Consumers of goods and services

• Foreign investors

• Government officials

• Owners of resources or factors of production

What is a FIRM in the Circular Flow of Economy?

• Purchases or hires resources from households to produce goods and services

• Provides services to the government

• Sells resources to households

• Exports goods to other countries

What is the role of the GOVERNMENT in the Circular Flow of Economy?

• Invests in foreign firms

• Exports goods to other countries

• Produces goods and services for households

• Transacts with households and firms, hires factors of production, and charges taxes

Who are considered as the REST OF THE WORLD in the Circular Flow of Economy?

• Foreigners who buy and sell goods and services with the country

• Local consumers

• Local producers

• Local government officials

What are EXPORTS in the Circular Flow of Economy?

• Goods and services that foreign investors sell locally

• Goods and services that Philippine firms sell to other countries

• Goods and services that the government provides

• Goods and services that households buy locally

What are IMPORTS in the Circular Flow of Economy?

• Goods and services that local firms buy from households

• Goods and services that local firms sell to households

• Goods and services that the government sells to other countries

• Goods and services that Filipinos buy from foreign firms

Who are OFWs in the Circular Flow of Economy?

• Filipinos working outside the country

• Foreign investors in the country

• Local government officials

• Local consumers

What do FOREIGN INVESTORS do in the Circular Flow of Economy?

• Provide services to households

• Invest in local firms

• Export goods to other countries

• Import goods from other countries

What do FIRMS purchase or hire from households in the Circular Flow of Economy?

• Resources to produce goods and services

• Finished goods for resale

• Government services

• Foreign goods for import