Circular Flow Model- Shows the money, goods and services, and factors of production through the economy.
Household= Person or group of people who share income. Households own factors of production.
(land, labor, capital, entrepreneurship.)
Firms= organization that produces goods & services for sale. Firms produce goods by taking inputs (factors of production) & turning them into outputs (finished products)
Government= providers of public goods & services and demanders of both private & public goods as well as factors of production.
Products market= where goods & services are bought and sold.
Factor Market/Resource Market= where factors of productions are bought and sold. (capital & labor)
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If the government stopped providing goods and services for firms and households, would the whole flow fall apart? Or what do you think would happen?
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