APMacro: Public and Private Sectors

Circular Flow income and expenditures
The U.S. economy is divided into a private sector, which includes households and businesses and a public sector or government. Households play a dual role in the economy. They supply the economy with resources and they purchase the greatest share of the goods and services produced by the economy. They obtain personal incomes in exchange for the resources they furnish the economy and from transfer payments they receive from government. Businesses make up the second major part of the private sector. Most businesses in the U.S. are characterized by the differences among firms in size and legal form, as well as in the products they produce. The economic activities of the public sector are extensive. Government performs five economic functions in the economy. These functions are: providing the legal structure, maintaining competition, redistributing income, reallocating resources, and stabilizing the economy.



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