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UNIT 2 -Circular Flow


Household - a person or a group of people who share an income

Firm(s) - organization that produces goods and services for sale

Factor (Resource) Market - market in which the factors of production are bought by firms and sold by households

(Ex: Organization buying from another

       hiring source of labor)

Product Market - where goods and services are bought and sold

(Ex: student buying burger)

Model:
Hong Kong - true free market w/ regulations

            Foreign Expenditure           U.S Imports     
↓               ↑                    ↓                   ↑                         {Product Market}
U.S Exports            U.S  Expenditures
 
 
Factor Payments

  1. Land - Rents
  2. Labor - Wages
  3. Capital - interests
  4. Entrepreneurship - Profits 

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