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Circular Flow and Intro to Macroeconomics

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Mark Anthony
Mark Anthony
Educación
1 de 9
Macroeconomics Week 4
CIRCULAR FLOW DIAGRAM is a visual model of the economy that shows how money flows through markets among households and firms.
PRODUCTION, RESOURCES, & INCOME FACTORS OF PRODUCTION ,[object Object]
Labor (labor)
Capital (interest) ; and
Entrepreneurship (profit),[object Object]
PRODUCTION UNITS & AND CONSUMPTION UNITS ,[object Object]
HOUSEHOLDS are resource owners (land, labor, capital, entrepreneurship)
FIRMS produce goods and services by utilizing the economic resources.,[object Object]

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Circular Flow and Intro to Macroeconomics

  • 2. CIRCULAR FLOW DIAGRAM is a visual model of the economy that shows how money flows through markets among households and firms.
  • 3.
  • 6.
  • 7.
  • 8. HOUSEHOLDS are resource owners (land, labor, capital, entrepreneurship)
  • 9.
  • 10.
  • 11. Concept of Value Added: For each stage in the production process adds to the value of the final product.
  • 12.
  • 13. 9 of 46 5-SECTOR CIRCULAR FLOW EXPORTS (X) GOVERNMENT SPENDING (G) INVESTMENT (I) BANKS GOVERNMENT REST OF THE WORLD SAVINGS (S) TAXES (T) IMPORTS (M) INFLOWS: Investment (I), Government Spending (G), and Exports (X) S + T + M = I + G + X or OUTFLOWS = INFLOWS OUTFLOWS: Savings (S), Taxes (T), and Imports (M)