The agents of society’s economic activity comprise a household, internal country and foreign society, companies, cooperation, and the government. All the agents of economy have a reciprocal relationship as a producer and consumer. The reciprocal relationship raises the flow of goods and services or the flow of service and money between producers and consumers.
A reciprocal relationship of between the agents of economy can be represented in a scheme in the form of circle called Circular Flow of Economic Activity. In this part, the foreign society is combined with a company because both have a similarity. Learn the following Circular Flow of Economic Activity!
The Circular Flow of Economic Activity
As the agent of economic activity, society can be divided into four; those are household, company, the government, and foreign society.
1. The household is a group of society that serves the factor of production for a company. By transferring the factor of production, a household obtains recompense in the form of money. Money is spent to buy goods or to pay service produced by a company.
2. The company and cooperation produce goods and services needed by households and provides recompense for a factor of production they accept.
3. The government purchase and equip goods and services needed by society.
4. The foreign society buys the exported goods and sells the imported goods.