Markets: Places to Buy and Sell

• The four types of agents we just identified (households, firms, government, and ROW) interact with each other in markets. In other words, they buy and sell goods and services. They loan and borrow money. Technically, loaning and borrowing money is also selling and buying. It’s viewed as selling/buying the use of a quantity of money for a period of time. The price of a loan is the interest rate.

• For macro theory purposes, it is useful to divide all markets into three types:

• Goods Markets

• Resource Markets (also called factor markets)

• Financial Markets (also called capital markets by some)

• These 3 types are distinquished by who is doing the buying or selling, and whether they are buying or selling real goods/services, or are they buying/selling the use of money.