ECON2105_Ch5 - CHAPTER FIVE: NATIONAL INCOME ACCOUNTING...

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NATIONAL INCOME ACCOUNTING SIMPLE CIRCULAR FLOW DIAGRAM Shows important relationships in an economy. In what two markets do firms and households interact in an economy? Draw a Simple Circular Flow Diagram. Be sure to accurately label all parties, markets, and flows. Do leakages and/or injections exist? Note 1. The dollar value paid by a buyer exactly _________________________________________ 2. Revenue received by either firms or households ____________________________________ 3. Total income received by households ______________________________________________ Firms pay workers wages and salaries for labor. They also pay rent to land owners and capital owners. These payments are made so firms can hire resources for production. GROSS DOMESTIC PRODUCT (GDP) Define GDP Note 1. Why is the value or amount paid by the final consumer used? Example: Measuring the value of a $10 pizza. Stage of Production
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ECON2105_Ch5 - CHAPTER FIVE: NATIONAL INCOME ACCOUNTING...

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