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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.
Based on this model, households earn income when ________________ purchase ___________ in factor markets.
Suppose Latasha earns $650 per week working as a programmer for PC Pros. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Jake $350 per week to wait tables. Jake uses $250 to purchase software from PC Pros.
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