Econ: Circular Flow


Circular Flow Earnig a Living
The Earn a Living activity helps us understand the relationship among consumers and producers. The economic relationship between households and businesses in often said to create a circular flow of economic activity. In a market economy, households are the owners of of resources and supply land, labor, and capital to businesses in exchange for income in the form of wages, rents, interest, and profits. Households then use their income to purchase finished goods and services supplied by businesses. Businesses then use the money from sales to pay resource owners for the services businesses receive by employing the resources. This relationship forms an interdependent economic system. The circular flow helps to explain and prove the assumption that voluntary trade creates wealth. It also shows how trade is influenced by the economic system in which people participate.


Homework:
Finish reading Chapter 3 Economic Systems
Chapter 2 Quiz II closes today
Chapter 2 Quiz III opens – due Friday 10/7

Arrows-02-june

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