The circular flow model
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THE CIRCULAR FLOW MODEL. Complicating the Model. 1. Goods and services flow from a. firms to households via the factor market b. firms to households via the product market c . households to firms via the government d. households to firms via the factor market

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THE CIRCULAR FLOW MODEL

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The circular flow model

THE CIRCULAR FLOW MODEL


Complicating the model

Complicating the Model


The circular flow model

1. Goods and services flow from

  • a. firms to households via the factor market

  • b. firms to households via the product market

  • c. households to firms via the government

  • d. households to firms via the factor market

  • e. households to firms via the product market


The circular flow model

2. The factors of production flow from

  • a. firms to households via the product market

  • b. firms to households via the factor market

  • c. households to firms via the government

  • d. households to firms via the product market

  • e. households to firms via the factor market


The circular flow model

3. The money paid to households via the factor market is called

  • a. income

  • b. profit

  • c. wages

  • d. taxes

  • e. revenue


The circular flow model

4. The money paid to firms via the product market is called

  • a. wages

  • b. income

  • c. profit

  • d. revenue

  • e. taxes


The circular flow model

5. The money paid by households and firms to the government is called

  • a. profit

  • b. income

  • c. revenue

  • d. wages

  • e. taxes


The circular flow model

  • 6. When Americans buy foreign goods (import), money flows out of the circular flow. This is called a/an

  • a. injection

  • b. leakage

  • c. consumption

  • d. tax

  • e. inflation


The circular flow model

  • 7. When foreigners buy American exported goods, money flows into the circular flow. This is called a/an

  • a. injection

  • b. leakage

  • c. consumption

  • d. tax

  • e. inflation

    .


The circular flow model

  • 8. Which of the following are LEAKAGES in the circular flow of goods/services/$ in the product market and the flow resources/$ in the factor market between households and firms(leakages in GDP)?

  • a. taxes

  • b. transfer payments (like social security)

  • c. imports

  • d. exports

  • e. savings


The circular flow model

  • 8. All of the following are INJECTIONS into circular flow of goods/services/$ in the product market and the flow resources/$ in the factor market between households and firms (injections in GDP) EXCEPT

  • a. subsidies

  • b. transfer payments (like social security)

  • c. exports

  • d. investments

  • e. savings


End of quiz

End of Quiz


Video tutorial gdp 3 50

VIDEO TUTORIAL: GDP (3:50)

  • EPISODE 20: GDP (3:50)

  • EPISODE #20 – GDP


Gross domestic product gdp

Gross Domestic Product (GDP)

  • The value of all final goods and services

  • Produced within an economy domestically

  • In a single year

  • Measured by

    • Expenditure approach

      • C + I + G + X

    • Income approach


Video tutorials real gdp and economic growth

Video Tutorials: Real GDP and ECONOMIC GROWTH

  • EPISODE 21: Real GDP (2:36)

  • EPISODE #21 – REAL GDP

  • EPISODE 22: Growth (1:30)

  • EPISODE #22 - GROWTH

  • Don’t worry. You won’t have to work problems with the formulas on the test.


Average labor productivity

AVERAGE LABOR PRODUCTIVITY

  • a measure of how much the typical worker can produce

  • Mathematically, this is the economy’s

    AVG. LABOR = TOTAL OUTPUT (GDP)

    PRODUCTIVITY TOTAL # OF WORKERS


What s not counted in gdp

What’s NOT counted in GDP?

  • Used goods

  • Intermediate goods

  • Illicit sales (BLACK MARKET)

  • Personal goods and services

  • Transfer of assets

  • Transfer payments


Counting gdp

Counting GDP:

EXPENDITURE METHOD:


The circular flow model

  • 1. The value of all final goods and services produced within an economy in a year:

  • a. GNP

  • b. GDP

  • c. CPI

  • d. the business cycle

  • e. the circular flow model


The circular flow model

2. Which of the following is NOT a component of GDP in the expenditure approach?

  • a. consumption

  • b. investment

  • c. government purchases

  • d. net exports

  • e. disposable income


The circular flow model

3. Which category makes up the largest share of the United States’ GDP?

  • a. consumption

  • b. investment

  • c. government purchases

  • d. net exports

  • e. net imports


The circular flow model

4. Which of the following is adjusted for inflation (changes in prices from year to year)?

  • a. consumption

  • b. net exports

  • c. GNP

  • d. nominal GDP

  • e. real GDP


The circular flow model

5. Economic growth is measured by

  • a. an decrease in nominal GDP.

  • b. an decrease in real GDP.

  • c. an increase in nominal GDP.

  • d. an increase in real GDP.

  • e. none of these. It’s measured with GNP.


The circular flow model

6. We don’t count the value of intermediate goods in GDP because

  • a. their sale is not legal

  • b. they are not actually bought or sold

  • c. they simply represent a transfer of money

  • d. they would be double counted when we count the value of final goods

  • e. all of these


The circular flow model

  • 7. Which of the following is not counted in GDP?

  • a. the purchase of a haircut

  • b. the government's purchase of flak jackets

  • c. the construction of a power plant

  • d. the purchase of an I-phone

  • e. the purchase of ten shares of Microsoft stock


The circular flow model

  • 8. Money is simply moved around and is not used to pay for goods and services (stock transactions, welfare payments, Social Security payments):

  • a. Personal goods and intermediate goods

  • b. Illicit sales

  • c. Black market

  • d. Transfer payments and financial transfers

  • e. None of these


The circular flow model

  • 9. Which category of GDP is the government's payment of a Social Security check counted in?

  • a. net exports

  • b. government expenditures

  • c. investment

  • d. consumption

  • e. The government's payment of a Social Security check is NOT counted in GDP.


The circular flow model

  • 10. Which of the following statements is NOT correct?

  • a. General Motors’ purchase of machinery is counted in investment.

  • b. Joe's purchase of a hot car stereo is not counted in GDP.

  • c. Gertathe German's purchase of an American made movie is counted in net exports.

  • d. The Defense Department's purchase of a flak jacket is counted in government purchases.

  • e. Levi’s purchase of denim material is counted in consumption.


The circular flow model

  • 11. Which category of GDP is the purchase of a new home counted in?

  • a. net exports

  • b. government expenditures

  • c. investment

  • d. consumption

  • e. The purchase of a new home is NOT counted in GDP.


The business cycle 1 07

The Business Cycle (1:07)

  • EPISODE 23: Business Cycles (1:07)

  • EPISODE #23 – BUSINESS CYCLES

  • Paul Solman: THE BUSINESS CYCLE – “The Beer Game”


The circular flow model

  • RECESSION

    • 2 consecutive quarters (6 mo.) of negative growth in real GDP

  • DEPRESSION

    • 8 consecutive quarters (2 yrs.) of negative growth in GDP


Online video series

Online Video Series

  • ECONOMICS USA - 30 minute programs which give explain economic concepts, giving historical background and context. Stream free.

  • See Program #3: Economic Growth

  • See Program #4: Booms and Busts for the Business Cycle.


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