Circular Flow Model

I. Circular Flow Model - Represents transactions in an economy by flows around a circle. It flows clockwise.

I apologize for the less than stellar quality of this image.

II. Three Economic Actors

• Household - A person or a group of people that share income
• Government (self-explanatory)
• Firm (Businesses) - An organization that produces goods and services for sale
• Resources/Factor Market - A place where households sell resources and businesses buy resources
• Product Market - A places where goods and services are produced by businesses and are bought and sold by the household

Here are some practice problems, which probably only 0.001% of you will actually click on. Knock yourselves out.