Circular Flow Four Groups: Consumers Business Firms Government Foreigners U.S. Export – something the U.S. makes and sells U.S. Import – something we bring in Two Markets: Factor Markets – any place where factors of production are bought and sold Product Markets – any place where finished goods and services are bought and sold Household – group of people living at same address and making joint financial decisions Leakages/Withdrawals Save Government/Taxes Imported Locating Markets – a market exists wherever and whenever an exchange takes place Dollars and Exchange – every market transaction involves an exchange of dollars for goods (product markets) or resources (factor markets) Barter Economy – exchanges not involving money (faster than money transactions) Must be buyer and seller in every market transaction
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