Circular Flow of a Mixed
Economy
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Government’s Role in a Mixed Economy
In a mixed economy,
• The government
purchases land,
labor, and capital
from households in
the factor market,
and
Circular Flow Diagram of a Mixed Economy
Product market
monetary flow
physical flow
Households
expenditures
• Purchases goods
and services in the
product market.
Government
physical flow
monetary flow
Factor market
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expenditures
Firms
Questions
• 1. Give an example of a
productive resource that
households sell to government.
• 2. Give an example of a good or
service that businesses sell to
government.
• 3. Give an example of a good or
service that government
provides to households in
exchange for money payments,
mainly taxes.
• 4. Give an example of a good or
service that government
provides to businesses in
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Transactions
• 1.Ted sold the trees
on 500 acres of land
he owned to a
lumber company
that cut them down
to make lumber.
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. Maria received
a $200 interest
payment from a
business to
which she had
lent money.
• 2
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• 3.The
Amalgamated
Shoe Company
sent 5,000 pairs of
shoes to a major
discount store.
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• 4.Terry paid $75 for
a new jacket.
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• 5. A business paid
Amy $4,000 a
month to use a
building she owns.
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• 6.Jane received a
paycheck for
$675.80 from her
employer.
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• 7. The Ajax
Cleaning Company
came to Frank’s
house and cleaned
his carpet.
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• 8. Larry earned
$35,000 last year
from the restaurant
he owns.
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• 9. Jason bought a
new battery for his
car.
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• 10. Sara paid the
bill for her charge
card at a
department store.
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