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Businesses ——> Resource Market
Costs
Resource Market ——> Businesses
Resources
Businesses ——> Product Market
Goods and Services
Product Market ——> Businesses
Revenue
Product Market ——> Households
Goods and Services
Households ——> Product Market
Consumption Expendicures
Households ——> Resource Market
Neutral Ability: Labor, Land, Capital, Entrepreneurship
Resource Market ——> Households
Interest Profit: Money, Income, Wages, Rent
Circular Flow Model
No government; Pure capitalism
Modified: Government’s 20% ——> Resource Market —→ Households
Government Spending
Modified: Households ——> Resource Market ——> Government’s 20%
Resources
Modified: Government’s 20% ——→ Product Market ——> Businesses
Revenue
Modified: Businesses ——→ Product Market ——>Government’s 20%
Goods and Services
Modified: Government’s 20% ——> Businesses and Households
Services
Modified: Businesses and Households ——> Government’s 20 %
Taxes
