warm-up/review what is the difference between gdp/gnp? what are the two methods for measuring each?...
TRANSCRIPT
Warm-Up/Review
• What is the difference between GDP/GNP?• What are the two methods for measuring
each?• List the 3 Macroeconomic goals.• What is the main purpose of determining a
countries GDP? GNP?
Circular Flow Model
• The 2nd method for determining a country’s GDP/GNP
• The Circular Flow Model describes and visually shows how the economy interacts with one
another!!!
We begin with the 3 spending sectors!
The three spending sectors are:
Businesses Gov’t Households
RESOURCE MARKET
Where you get your 4 factors
of production to make your goods and services
PRODUCT MARKET
Where you buy your finished
goods and services for use
Businesses Gov’t Households
Resource Market
Product Market
• HOUESHOLDS provide the resource market with the four factors of production.• Land• Labor• Capital • entrepreneurship
• In return, they receive income in the form of:• Rent• Wages• Interest• Profit
Businesses Gov’t Households
Resource Market
Product Market
4 factors of production
R, W, I, & P
• Businesses spend $$$ (costs) in the resource market to get the 4 factors of production to make goods and services.
• In return, businesses receive the land, labor, capital and entrepreneurship to make goods and services.
Businesses Gov’t Households
Resource Market
Product Market
4 factors of production
R, W, I, & P
Resources
Costs
• Businesses make goods and services with their resources and supply it to the product market.
• In return, businesses get revenue for supplying their goods and services.
Businesses Gov’t Households
Resource Market
Product Market
4 factors of production
R, W, I, & P
Resources
Costs
Revenue
Goods and Services
• Households spend money in the product market.
• In return, households get the goods and services they want and need.
Businesses Gov’t Households
Resource Market
Product Market
4 factors of production
R, W, I, & P
Resources
Costs
Revenue
Goods and Services Goods and Services
Consumption
Spending
• The government spends money in the resource market to get the 4 factors of production.
• The government spends money in the product market to buy goods and services.
Businesses Gov’t Households
Resource Market
Product Market
4 factors of production
R, W, I, & P
Resources
Costs
Revenue
Goods and Services Goods and Services
Consumption
Spending
Expenditures
Expenditures
Resources
Goods and Services
• The government provides goods and services to households and businesses. • Police protection• Fire fighters• National defense• Parks• Schools
• In return, households and businesses pays taxes to the government!
Businesses Gov’t Households
Resource Market
Product Market
4 factors of production
R, W, I, & P
Resources
Costs
Revenue
Goods and Services Goods and Services
Consumption
Spending
Expenditures
Expenditures
Resources
Goods and Services
Goods & Services Goods & Services
Taxes Taxes
Review Questions!!!
1. The factors of production are bought and sold in the ___________ market.
2. Goods and services are bought and sold in the ___________ market.
3. In the circular flow model, ____________ buy the factors of production from _______________.
4. In the circular flow model, ______________ buy goods and services from _________________.
5. Households and businesses pay ___________ to the government in exchange for goods and services.
Assignment: Illustrated Circular Flow Diagram
• On a separate sheet of paper, draw an ILLUSTRATED Circular Flow Diagram!!!
• Use the entire paper!!!• Color your Circular Flow Diagram
to help you organize what’s going on!!!
2 Additions ($$) to the Circular Flow Model (Not seen in
the map)
• INVESTMENT
• When businesses invest money in the economy, it pumps extra money into our economy
• EXPORTS
• When foreigners buy American goods, it pumps more money into our economy
2 Leakages to the Circular Flow Model (Not seen in
the map)
• SAVINGS
• Since households don’t spend all of their money, their savings is not money flowing into the economy.
• IMPORTS
• When Americans buy foreign goods, it pumps money out of the U.S. economy.