Circular Flow of a Mixed Economy Have Notebooks Out Test on Next Friday

Circular Flow of a Mixed Economy

Circular Flow of a Mixed Economy

Have Notebooks Out

Test on Next Friday

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monetary flow

physical flow

monetary flow

physical flow

Circular Flow Diagram of a Mixed Economy

Households Firms

Product market

Factor market

Government expendituresexpenditures

governm

ent-

owned facto

rstaxes

taxesgovern

ment

purchases

Government’s Role in a Mixed EconomyIn a mixed economy,

• The government purchases land, labor, and capital from households in the factor market, and

• Purchases goods and services in the product market.

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Questions• 1. Give an example of a productive resource that households sell

to government.

• 2. Give an example of a good or service that businesses sell to government.

• 3. Give an example of a good or service that government provides to households in exchange for money payments, mainly taxes.

• 4. Give an example of a good or service that government provides to businesses in exchange for money payments.

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Transactions

• 1.Ted sold the trees on 500 acres of land he owned to a lumber company that cut them down to make lumber.

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• 2. Maria received a $200 interest payment from a business to which she had lent money.

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• 3.The Amalgamated Shoe Company sent 5,000 pairs of shoes to a major discount store.

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• 4.Terry paid $75 for a new jacket.

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• 5. A business paid Amy $4,000 a month to use a building she owns.

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• 6.Jane received a paycheck for $675.80 from her employer.

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• 7. The Ajax Cleaning Company came to Frank’s house and cleaned his carpet.

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•8. Larry earned $35,000 last year from the restaurant he owns.

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• 9. Jason bought a new battery for his car.

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• 10. Sara paid the bill for her charge card at a department store.