Circular Flow Reading & Chart Review and Federal Reserve Activity

Understand the Circular Flow Model and the Federal Reserve. Economics for 8th grade.

Circular Flow Consumers, producers, and the government interact with one another in a free-enterprise economy. These three groups exchange resources, products, and money payments. The circular-flow model demonstrates how these exchanges take place. It shows in a simple fashion how the U.S. economy works.According to the circular-flow model, households supply resources, such as labor, to the government and to businesses. Businesses then make products for sale to households and to the government. Households and the government then pay the businesses for the products. The government produces goods and services that benefit businesses and households. It produces these goods and services by using resources such as employee labor and taxes paid by employees, households, and businesses.Employees receive money payments, called wages or income, in exchange for the labor they provide to business and to the government. Households also receive interest, in exchange for capital that they invest. Employees and their households then act as consumers, using their income to buy goods from producers and to pay taxes to the government. The money in the economy continues to move in this circular flow among businesses, government, and households. Households The smallest economic unit is the household or individual. Householders are consumers- they buy goods and services. They are also producers, their labor and their investments enable businesses to create goods and services. Many individuals try to save money. The money that they save or invest is used to expand the economy. Money invested in company shares and bonds allows companies to develop new products and to build or modernize their plants. Money invested in government bonds is used to build bridges and schools.Consumers- buy goods and services.Producers- labor and investments enable the government and business to create goods and services. Businesses Businesses are consumers as well as producers As consumers, they use land, labor, natural resources and capital to convert them into final goods and services. As producers, they provide households with goods and services.Producers- provide households with goods and servicesConsumers- use labor, natural resources and capital Government The government also has a role in production and consumption. Households provide some of their resources to governments as well as to business. Businesses sell their products and services to governments as well as to households. Governments provide payments, goods, and services to households and businesses and tax both to pay for them.Producers- provide goods and services to householdsConsumers- buy products from businesses STUDENT CHART ACTIVITY Explain how households, businesses, and the government act as producers and consumers. The Flow As Producers As Consumers Households Businesses Government Explain the relationships between each of the following pairs (left and right): Consumers Businesses Businesses Government Government Consumers Here is the video in our lesson if you'd like to rewatch for a review: Fill in the blanks for the following sentences: The three types of money are coins, currency, and deposits.The Bureau of Engraving and Printing is a government agency that designs and prints money for the Federal Reserve.The Federal Reserve system is our nation's central bank and it consists of a Board of Governors and 12 federal reserve banks.The Chairperson is appointed by the President approved by the Senate. THE FEDERAL RESERVE In a paragraph, explain what are the functions of the Federal Reserve? TRUE OR FALSE? Is it true that banks and credit unions are options of financial institutions? True False True or false? Banks and credit unions help facilitate the exchange of money between savers and borrowers? True False True or False? Banks can receive deposits, but credit unions cannot. True False True or False? Banks and credit unions help provide financial capital (money) to those who wants to start or grow their business? True False