Warmup/Journal #7

• Pick up, read, and summarize the article titled “China’s Economy is on Track to Surpass the U.S. by 2035

• Also answer if you think this is an accurate article and explain why or why not.

• ½ page minimum

Economics

Unit 2: Competitive MarketsLesson 8: Circular Flow

Circular Flow Model

• A tool for understanding how the U.S. economy or any market based economy operates.

Economic Actors

• 2 Economic Actors• Consumers = Households• Producers = Business Firms• 2 Markets• Product markets – goods and services• Resource markets – land, labor, capital,

entrepreneurship

Economic Actors continued

• These markets do not have a single location and they reflect the supply and demand for any resource

• Financial markets establish interest rates• Labor markets establish the wages required to

hire workers

Key Points of Circular Flow

• Households are both buyers & sellers – buy goods & services in product market – also sell resources – land, labor, capital in the resource market

• Business firms are both buyers & sellers – in product market sell what they produce – in resource market buys the resources of individuals

Key Points of Circular Flow

• $$$ also flows in one direction• Resources & products always flow in the

opposite direction• Every action in circular flow has a reaction –

every dollar spent in the product market becomes a dollar of income to someone

• Ex. Can of corn• Infinite number of transactions using circular

flow model

Read pg. 62 in Book

• Answer in your notes how each of the three economic questions are answered using the circular flow model

Cooperative Group Work

• Page 63 – Applying Economic Skills• Minicase: The Boeing Company Layoffs• One answer sheet per table• Due at end of the hour