CIRCULAR FLOW DIAGRAM
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Circular Flow Diagram
Summarizes transactions between the different economic agents.
Households, firms, government and world
Households, firms, government and world
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households
Circular Flow Diagram assumes that the economy is composed of ______ which own the factors of production and consume goods and services and firms
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Upper loop
firms>households
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Lower loop
households>firms
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Government purchases of goods and services
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Government payments for factors services
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Transfer payments between different agents
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Firms and households pay taxes to government
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Transaction with the foreign sector
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Exports
sales of domestically produced goods to other countries
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Exports
Payment from the rest of the world
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Imports
goods brought from other countries
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Imports
Payment by the purchasing domestic agent to the world
Note 
Flashcards (34)