Agents: Firms, the producers of goods and services

The primary function of firms is to produce goods and services for consumers. As a result, firms are like a giant money pipe: they sell goods which brings the money in, but then they pay the money out in factor markets paying workers and owners.
The total value of the goods and services produced by all firms in the nation is called Gross Domestic Product (GDP). This is probably the most important single variable in macroeconomics. It is a measure how much/many goods we produce for our consumption. Our living standards as consumers cannot increase unless the firms produce the goods. So increasing GDP is seen as good.
Firms also have two other money flows which we will look at on the next page.

The primary function of firms is to produce goods and services for consumers. As a result, firms are like a giant money pipe: they sell goods which brings the money in, but then they pay the money out in factor markets paying workers and owners.