Economics Unit 3
Circular Flow Diagram
This diagram shows the flow of money and resources from businesses to households and from households to businesses. The four components in this diagram are the households, businesses and the product & resource/ factor markets.
The Functions of Money
- acts as a medium of exchange meaning it is used in exchange for a numerous amount of goods and services.
- serves as a standard of value or measure of value meaning that it uses prices to determine the economic value of different goods and services.
- has a store of value meaning that it will lasts and it won't perish.
Words to Know
- Voluntary Exchange - freely trading goods and services throughout.
- Barter - trading goods and services without the use of money (NOT SO EASY)
- Market - anywhere where people buy and sell goods and services