TEKS 113.31(d)(7), Social Studies (Economics)

Subject: Economics – High School
TEKS 113.31(d)(7)

Summary of TEKS 113.31(d)(7)

TEKS 113.31(d)(7) explains the circular-flow model, showing how money, goods, and services move between households, businesses, and the government. Households provide resources and buy goods, while businesses use resources to produce and sell goods. The government collects taxes, spends on public services, and regulates economic activities, affecting the flow.

Key Concepts of TEKS 113.31(d)(7)

1. Circular-Flow Model: Represents the movement of resources, goods, and money in the economy.
2. Households: Provide labor, land, and capital while buying goods and services.
3. Firms: Use resources to produce goods and services and sell them to households.
4. Government Actions: Collect taxes, provide public services, and regulate the economy to maintain balance.

Section 1: What Is the Circular-Flow Model?

The circular-flow model represents the movement of money, goods, services, and resources in the economy. It has two main parts:

Firms (businesses): Companies that use resources to produce goods and services. They sell these products to households and pay for the resources they use.

Households (resource owners): People who own resources like land, labor, and capital. They sell these resources to earn income and spend money to buy goods and services.

Section 2: Roles of Resource Owners and Firms

TEKS 113.31(d)(7)(A)

Explanation: In the circular-flow model, households and firms depend on each other.

Households (Resource Owners)

• Provide resources like labor, land, and capital.
  • Example: A teacher provides labor to a school and earns a paycheck.
• Use income to buy goods and services.
  • Example: A family spends money on groceries, cars, and vacations.

Firms (Businesses)

• Use resources from households to produce goods and services.
  • Example: A car company uses labor and raw materials to build vehicles.
• Sell goods and services to households in exchange for money.
  • Example: A coffee shop sells drinks to customers, earning revenue.

Real-World Example of the Model

• A farmer (household) sells crops (resource) to a grocery store (firm).
• The grocery store sells those crops to families, who pay money in return.
• The farmer uses the money to buy farming tools from another business.

Key Idea: Households and firms create a continuous loop of resources, goods, and money in the economy.

Section 3: How Does the Government Affect the Circular-Flow Model?

TEKS 113.31(d)(7)(B)

Explanation: The government plays an important role in the circular-flow model by collecting taxes, providing public goods and services, and regulating economic activities.

Government Actions

1. Collecting Taxes:
   • The government collects taxes from households and firms.
   • Example: People pay income taxes, and businesses pay corporate taxes.
2. Spending on Public Services:
   • The government uses tax money to provide goods and services like roads, schools, and national defense.
   • Example: The government hires construction workers to build highways, creating jobs and improving infrastructure.
3. Regulating the Economy:
   • The government sets rules to ensure fair business practices and protect consumers.
   • Example: Minimum wage laws ensure workers earn a fair income.

Impact on the Circular Flow

• Government spending injects money into the economy, boosting demand for goods and services.
• Taxes reduce disposable income for households and businesses but fund public projects that benefit everyone.

Key Idea: The government influences the circular-flow model by taxing, spending, and regulating, which keeps the economy running smoothly.

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