Concept Of Circular Flow And The National Economy

1516 WordsMar 31, 20157 Pages
Concept Guide 2 Claudia Cooper Income, Circular Flow, and The National Economy 2.1.1 Income – Describe how individuals and businesses earn income by selling productive resources. They receive the difference between the monetary value at which it is sold and the cost they had to pay to make it. 2.1.2 Circular Flow and the National Economy – Using the concept of circular flow, analyze the roles of and the relationships between households, business firms, financial institutions, and government and nongovernment agencies in the economy of the United States. Businesses → Buy resources, sell products Product market → Business sell to, households buy from Resource market → Households sell to (labor), Businesses buy Households → sell resources, buy products Day #2 - Financial Institutions, Money Supply, Inflation and Recession 2.1.3 Financial Institutions and Money Supply – Analyze how decisions by the Federal Reserve and actions by financial institutions (e.g., commercial banks, credit unions) regarding deposits and loans, impact the expansion and contraction of the money supply. 2.1.4 Money Supply, Inflation, and Recession – Explain the relationships between money supply, inflation, and recessions. A major cause of inflation is when there is more money than that which is available. Meaning, there is more of a demand than a quantity. When there is more money to be spent, companies will charge more for their product, increasing the general market’s equilibrium. **check

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