Circular Flow Matrix

MATRIX

The Circular Flow

While the government --taxes households,-- --they provide them-- ---public goods and--- transfer payments (in -their case, welfare).-

While the government --taxes businesses,-- --they provide them-- ---public goods and--- transfer payments (in their case, subsidies).

They pay for resources --such as firefighters,- construction workers, ----and teachers.----

The government pays--for these resources- --in a process called--government spending.

The government pays --for these goods in-- ---a process called--- government spending.

---The government--- -purchases goods &- services from product -------markets.-------

The government runs the public --sector part of the economy,-- --which makes schools, roads,-- ------national defense, etc------

-Businesses have to- -pay for resources, so- they use some of their -revenue to get them.-

-Businesses will use- --these resources to-- -manufacture goods-

--In return, they will-- --receive income for-- -their contribution as- -one or more of the 4- --factors of income-- (rent, wages, income, and profit) depending ---on the resource--- -------provided.-------

---Households will--- provide one or more of ----the 4 factors of---- ---resources (land,--- --labor, capital, and-- -entrepreneurship) to- ------the market.------

The money accrued is ------given to the------ ----businesses as---- -------revenue-------

-Businesses give the- ---product market--- merchandise to sell to -----households-----

-----Allows for----- households to sell -their resources to- ----businesses----

-----Allows for----- businesses to sell -their products to- ----households----

-Provides goods &----resources to--- ----households----

Provides resources -----(workers,----- machinery, etc.) to ----businesses----

Households go to the --product market to-----receive certain--- items they may need -------or want-------

---They spend their--- ----money on the---- manufactured items, basically "consuming" ---------them.---------

Government Spending

Goods & Services

Goods

Subsidies

Taxes

Government Spending

Goods

Welfare

Taxes

Resources

Resources

Resources

Cost of Production

Income

Consumer Spending

Goods & Services

Goods & Services

Product Market

Resource Market

Businesses

Households

Government

Revenue $$$