DO NOW 1 Anticipation GuideAnswer Before 2 Warmup

DO NOW 1. Anticipation Guide—Answer “Before” 2. Warm-up Questions— (answer on BACK) -Name 2 goods or services you have bought or consumed this week. -Name 2 things “the government” has provided for you this week. -What do you think “private sector”

THE CIRCULAR FLOW OF THE U. S. MARKET ECONOMY

ESSENTIAL QUESTION How do individual households, businesses, and government interact in the U. S. (market) economy? LEARNING TARGET I can identify each sector of the US economy found in the circular flow model and explain the flow of resources throughout by illustrating the interaction between each. I will show this by completing a circular flow model, first with my class and then independently.

True The three parts of the circular flow of economics are: individual households, businesses, and government. False

True Only individuals are consumers in an economy. False

True The government is a producer of goods and services in a mixed-market economy. False

True Only individual households pay taxes to the government in a mixed-market economy. False

True The government supplies itself with all the resources it needs in a mixed-market economy. False

True Labor is a human resource that is produced by individual households and used (consumed) by businesses. False

True In a mixed-market economy, only businesses provide individual households with goods and services. False

True Individual households, businesses, and the government are all producers in a mixed-market economy. False

The Circular Flow of the U. S. Market Economy EC 2. 1 Describe the interaction of individual households, businesses, and government in the U. S. economy.

Resources… Goods and Services… and Money… … flow continuously among Households Businesses Government

… This continuous flow of resources, goods & services, and money throughout the economy is called the CIRCULAR FLOW MODEL

The CIRCULAR FLOW MODEL has 3 components: INDIVIDUAL HOUSEHOLDS BUSINESSES (the “private sector”) GOVERNEMENTS (the “public sector”)

Individual Households • own the resources used in production of goods & services: • Human resources– Individuals “own” their time, skills, talents, intellect, etc. • Capital resources- Individuals invest money in banks, stocks, bonds, etc. • sell/invest those resources: • Human resources— “sell” their labor • Capital resources– “invest” their capital • and use the income to purchase private goods & services.

Individual Households • Examples of Human resources that households provide: • Businesses– (income paid out of business’ profits…) • Insurance agent • Salesperson • Security guard • Governments– (income paid out of taxes…) • Teacher • Policeman • National Park ranger

Businesses • Privately-owned producers who… • buy resources used in their production: • Human resources– Pay individuals an income for their time, skills, talents, intellect, etc. • Capital resources- Use the money individuals invest to grow • Natural resources- Use capital to purchase inputs from other businesses • sell the private goods & services to individual households, other businesses, governments • use the profits to buy more resources.

Businesses • Examples of PRIVATE goods & services • Consumed by individual households: • Cell phone service • Wendy’s french fries • Honda Civic • Consumed other businesses: • Starbuck’s coffee service for a conference • Lumber to a construction company • Temp agency service • Consumed by governments: • Military aircraft production (Boeing, Mc. Donnell Douglas) • School textbooks (Holt, Mc. Graw Hill)

Governments • At ALL levels—local, state, and national, governments… • receive tax revenue (“income” from taxpayers) • Individual households—paying taxes on income and purchases of private goods & services • Businesses—paying taxes on business income and purchase of private goods & services (resources) to • use the tax revenue to provide public goods and services.

Governments • Examples of PUBLIC goods & services • Consumed by individual households: • First responders (police, fire, EMS) • Parks • Schools • National security (military, DHS, TSA, Border Patrol, etc) • Consumed other businesses: • First responders (police, fire, EMS) • Health inspectors • Professional/business licensing

• In the CIRCULAR FLOW MODEL each part interacts with the others. • There is a “give and take” of resources throughout the model. • If something is going TO a part of the economy, something has to be coming FROM that part in “exchange. ”

IN EXCHANGE… Some individual households supply businesses with human resources (labor) Businesses pay those households income for their human resources (labor) All households consume… so, they provide businesses with payments for PRIVATE goods & services Businesses give households the PRIVATE goods & services they paid for.

IN EXCHANGE… Some individual households supply governments with human resources (labor) Government pay those households income for their human resources (labor) All households live under a government… so, they provide them with tax payments Governments provide households with PUBLIC goods & services for their tax payments

IN EXCHANGE… Businesses give governments the PRIVATE goods & services they paid for. All businesses operate under a government…so they provide them with tax payments Governments consume, too…so, they provide businesses with payments for PRIVATE goods & services Governments provide businesses with PUBLIC goods & services for their tax payments

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