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ECONOMIC SYSTEM: The assorted institutions that society uses to answer the three basic questions of allocation and address the fundamental problem of scarcity. Another, more popular term for economic system is economy. An economy, or economic system, is the structural framework in which households, businesses, and governments undertake the production and consumption decisions that allocate limited resources to satisfy unlimited wants and needs.
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Lesson 11: Circular Flow | Unit 1: Basic Flow
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Page: 5 of 22
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Topic:
The Payment Flow
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The payment flow goes in the opposite direction of the physical flow. A physical commodity goes one direction through markets and payment goes the other.- The household sector buys production from the business sector (counter-clockwise flow) in exchange for payment (clockwise flow) through product markets.
- The business sector buys resources from the household sector (counter-clockwise flow) in exchange for payment (clockwise flow) through factor markets.
- Revenue received by the business sector for selling goods is used to pay the factors of production.
- Factor payments become income used by household sector to buy production from the business sector.
- The circular flow makes about six cycles around the economy each year.
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AUCTION A formal market exchange in which prospective buyers make bids to purchase a commodity. An auction is an effective way of exchanging commodities by bringing together buyers and sellers. Auctions are commonly used to exchange financial instruments, agricultural commodities, personal assets, and works of art. Three notable types of auctions are English, Dutch, and sealed-bid.
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RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time touring the new suburban shopping complex hoping to buy either a tall storage cabinet with five shelves and a secure lock or a birthday greeting card for your grandmother. Be on the lookout for celebrities who speak directly to you through your television.
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
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"It's usually the last ounce of effort that tips the scales of success." -- Rick Beneteau
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APEC
Asia-Pacific Economic Co-operation
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