The Circular Flow Model
12th Grade · Social Studies · 45 min· 11.h.3 Students Will Know That Because One Person’s Expenditure On A New Good Or Service Is Another Person’s Income, Currency And Products Flow In An Economy By The Various Factors Of Production. Using This Knowledge, Students Will Be Able To Draw And Label A Circular Flow Diagram And Explain The Interrelated Roles Of Households, Businesses, And Government In The Economy. Throughout The Lesson, They Will Write An Interpretation Of The Model Itself, Write An Explanation Of The Flow Of Money, Goods And Services, And Write An Analysis Of Either The Role Of The Consumer Or The Role Of The Producer In The Circular Flow Model.
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Learning Objective
I can draw and explain the circular flow model, including the roles of households, businesses, and government.
- 1
The circular flow model illustrates the flows of factors of production, goods and services, and money within the economy.
- 2
Households own all the factors of production in the economy, which include land, labor, capital, and entrepreneurial ability.
- 3
In the market for resources, households sell resources and businesses buy resources, while in the market for goods and services, businesses sell goods and services and households buy them.
