Download Circular Flow

Focus Questions
Which court in VA
would hear cases
that require a jury?
Which Federal Court
has a judge and a
jury?
A.
B.
C.
D.
A. U.S. Tax Court
B. U.S. District Court
C. U.S. Court of
Appeals
D. U.S. Supreme
Court
U.S. District Court
VA Circuit Court
VA Supreme Court
VA General District
Court.
Focus Questions
Mary wants to go into
business making
wedding cakes. She
will work alone. What
is the easiest type of
business for her to set
up?
A.
B.
C.
D.
Corporation
Partnership
Sole Proprietorship
LLC
John has been very
successful running his
single auto parts store.
Now John is looking to
open 3 new stores. What
type of business should
John set up if he wants to
raise money quickly by
selling stock?
A.
B.
C.
D.
Corporation
Partnership
Sole Proprietorship
LLC
Focus Questions
What is the main role of the
consumer in the United
States economy?
A. To operate the economy
without undue influence
B. To determine through
their purchases what will
be produced
C. To make products for
themselves
D. To buy all goods at any
price
Third parties often revolve
around political
personalities; from the
list below choose the pair
that represents the most
successful 3rd party
candidates.
A. Barrack Obama and John
McCain
B. Abraham Lincoln and
Thomas Jefferson
C. Theodore Roosevelt and
Ross Perot
D. Bill Clinton and George
H.W. Bush
Circular Flow
of the U.S.
Economy
FLOW
BUSINESSES
CE.12b –
Economic
Flow
INDIVIDUALS
HOUSEHOLDS
PRIVATE SECTOR
Economic Flow
• Our economy flows
in a circular flow like
a wheel.
• For the economy to
be functioning
properly, that wheel
needs to spin at a
moderate, steady
pace.
PROPERLY
MODERATE
STEADY
Economic Flow
• If the wheel spins
too fast it is bad.
Inflation occurs.
• Inflation- a rapid
increase in price
without increase in
demand.
• Example -GAS
PRICES
FAST
INFLATION
INCREASE
DEMAND/SUPPLY
Economic Flow
• If the wheel starts to
slow down that can be
bad too! This causes a
recession.
• Recession – a gradual
slowing of the economy.
• Recessions are marked
by a slowing in demand.
Resulting in a loss of
consumer confidence.
SLOW DOWN
RECESSION
ECONOMY
DEMAND
Economic Flow
• Consumer Confidence –
a feeling that it is safe
to spend money.
• If consumers don’t
spend money, demand
declines.
• If demand declines,
producers start laying
off workers.
Economic Flow
• If a recession is not
corrected and the
economy returns to
normal speed, the
economy will essentially
stop. This is called a
depression.
• Depression – Period of
massive unemployment
low supply, low
demand, and high
prices.
RECESSION
NORMAL
STOP
DEPRESSION
UNEMPLOYMENT
HIGH
SUPPLY
DEMAND
Economic Flow
TOO FAST!!!! INFLATION!!!! TOO FAST!!!! INFLATION!!! TOO FAST!!! INFLATION!!!! TOO FAST!!! INFLATION!!!!
B
U
L
L
B
U
L
L
B
E
A
R
B
E
A
R
TOO SLOW!!!! RECESSION & DEPRESSION!!!! TOO SLOW!!!! RECESSION & DEPRESSION!!!!
ECONOMIC FLOW
• Our economy
consists of the
private sector and
the public sector.
• The private sector
consists of
individuals and
businesses.
• Individuals and
businesses provide
resources (land,
labor and capital)
that businesses use
to create goods
• Businesses sell their
goods to consumers
in the market place.
The Private Sector
Economic Flow
Individuals and businesses provide resources (land,
labor and capital) that businesses use to create goods
Businesses sell their goods to consumers in the market
place.
INDIVIDUALS
BUSINESSES
GOODS
BUSINESSES
INDIVIDUALS &
HOUSEHOLDS
(CONSUMERS)
(PRODUCERS)
SELL
CONSUMERS
Economic Flow
• Consumers pay
businesses for their
goods and services.
• Businesses pay
individuals and
other businesses for
their labor and
resources.
• As long as this
motion continues
consumer
confidence will
remain high and the
economy will
continue to be good.
• It will flow like a car
traveling at 45 mph.
Economic Flow
Consumers pay for goods and services received
Individuals and businesses provide
resources (land, labor and capital)
that businesses use to create goods
Businesses sell their goods to
consumers in the market place.
Producers pay for resources received
CONSUMERS
PRODUCERS
RECEIVED
RECEIVED – WAGES, CAPITAL
Economic Flow
• What if the
economic wheel
spins to fast?
• How can the
economy be fixed?
• If the private sector
is the wheel, then
the government acts
as the gas & brake.
Economic Flow
• Through spending and
taxes the government
can speed up the flow
or slow it down.
• The government acts
as the gas and the
brake because it is the
largest consumer of
private goods &
services.
• The government is the
biggest customer.
• The government can
spend more money
(buy more goods from
the private sector).
This will cause the
economy to speed up.
• The Government is the
Public Sector in a mixed
Economy
Economic Flow
• The reverse is true
as well.
• If the government
spends less, the
economy will slow
down.
Spend
Spend
Speed
Speed
• The government pays
for it’s purchases using
taxes.
• If the government
taxes the people &
businesses less. The
economic wheel will
speed up because
people & businesses
have more $$$ to
spend.
Economic Flow
• If the government
taxes more the
economy will slow
down. (Private
Sector has less
money to spend).
TAXES
TAXES
SPEED
SPEED
Public goods and services
taxes
taxes
Public goods and services
The Public Sector
The Public Sector & Consumers
• If the Government
increases taxes on
consumers incomes
• They will have less
money to spend
• Economy Slows
The Public Sector & Consumers
• If the Government
DECREASES taxes
on consumers
incomes
• They will have MORE
money to spend
• Economy Speeds Up
GOVERNMENT
=
PUBLIC
SECTOR
TAXES
PUBLIC
Spending – Wages
The Public Sector & Businesses
• The Government is
the largest
CONSUMER in
America.
• The Government
can slow businesses
by
• Raising Taxes
• Cutting Spending
The Public Sector & Businesses
• The Government is
the largest
CONSUMER in
America.
• The Government
can speed up
businesses by
• Lower Taxes
• Increasing Spending
Economic Flow
Consumers pay for goods and services received
Individuals and businesses provide
resources (land, labor and capital)
that businesses use to create goods
taxes
Public goods and
services
Public goods and
services
taxes
Businesses sell their goods to
consumers in the market place.
Producers pay for resources received
PUBLIC
TAXES
Spending- Buys
G&S
Exit Questions
Individuals (households)
own the resources used
in production, sell the
resources, and use the
income —
A. to purchase products
B. to buy more resources
C. to increase consumption
D. to provide public goods
and services
In the United States
economy, there is a
circular flow of what
three things between
households, businesses,
and markets?
A. Resources, goods, and
services
B. Resources, goods, and
interest
C. Resources, stocks, and
bonds
D. Resources, dividends,
and taxes
The FRAME Routine
Key Topic
Economic Flow
is about…
Resources, goods and services, and money flow continuously among households,
businesses, and markets in the United States economy.
For the economy to be functioning properly,
that wheel needs to spin at a moderate,
steady pace.
If the wheel spins too fast it is bad, inflation
occurs. Inflation is the rapid increase in price
without increase in demand.
If the wheel starts to slow it causes a recession
which is a gradual slowing of the economy. They
are marked by a slowing in demand.
If a recession is not corrected and the economy
returns to normal speed, the economy will
essentially stop. This is called a depression,
which is a period of massive unemployment low
supply, low demand, and high prices.
The FRAME Routine
Key Topic
is about…
Resources, goods and services, and money ____________ continuously among ________________,
___________________, and ___________________ in the United States economy.
For the economy to be functioning _____________,
that wheel needs to spin at a ____________,
____________ pace.
If the wheel spins too________ it is bad, and ____________
occurs. Inflation is the rapid __________________ in price
without increase in ___________________.
If the wheel starts to _____________ it causes a
________________ which is a gradual slowing of the
________________. They are marked by a slowing in
__________________.
If a _______________ is not corrected and the economy returns to
_______________ speed, the economy will essentially __________.
This is called a ________________, which is a period of massive
__________________, low _____________ and ______________,
and __________ prices.