The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Firms Markets for Goods and Services Markets for Factors of Production Based on this model, households earn income when Households purchase in factor markets.
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Firms Markets for Goods and Services Markets for Factors of Production Based on this model, households earn income when Households purchase in factor markets.
Brief Principles of Macroeconomics (MindTap Course List)
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Chapter7: Production And Growth
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![2. The circular-flow model
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the
inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
Firms
Markets for
Goods and Services
Markets for
Factors of Production
Based on this model, households earn income when
Households
purchase
in factor markets.
Suppose Susan earns $650 per week working as a corporate attorney for Rowan and Martin Associates. She uses $9 to have breakfast at Dinah's
Diner. Dinah's Diner pays Raphael $350 per week to work as a short-order cook. Raphael uses $250 to purchase legal service from Rowan and Martin
Associates.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1ba5ee98-7d4d-481b-afca-861b9a3e332f%2F4e112600-6eb8-480a-acd8-000722300419%2F30kbdu_processed.png&w=3840&q=75)
Transcribed Image Text:2. The circular-flow model
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the
inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
Firms
Markets for
Goods and Services
Markets for
Factors of Production
Based on this model, households earn income when
Households
purchase
in factor markets.
Suppose Susan earns $650 per week working as a corporate attorney for Rowan and Martin Associates. She uses $9 to have breakfast at Dinah's
Diner. Dinah's Diner pays Raphael $350 per week to work as a short-order cook. Raphael uses $250 to purchase legal service from Rowan and Martin
Associates.
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