Circular Flow Model

Front

What are the four main parts of the circular flow model for a pure market economy? Options: Product Market, Stock Market, Factor Market, Fish Market; Product Market, House Market, Factor Market, Good Market; Factor Market, Product Market, Households, Firms; Factor Market, households, Stock Market, super market

Back

Factor Market, Product Market, Households, Firms

Answer explanation

The circular flow model for a pure market economy consists of four main parts: Factor Market, Product Market, Households, and Firms. These components interact to show how goods, services, and resources flow in the economy.

Front

Where are factors of production (land, labor, etc) exchanged in the circular flow model?

Back

Factor Market

Answer explanation

Factors of production, such as land and labor, are exchanged in the Factor Market. This is where individuals provide resources to firms, which use them to produce goods and services.

Front

Where do factors of production (land, labor, etc) originally come from in the circular flow model?

Back

Households

Answer explanation

In the circular flow model, factors of production such as land and labor originate from households. Households provide these resources to firms in the factor market, making 'Households' the correct answer.

Front

Someone buys a car in exchange for a large amount of money. They have completed an exchange in which part of the circular flow model?

Back

Product Market

Answer explanation

The exchange of money for a car occurs in the Product Market, where goods and services are bought and sold. In this case, the car is a product being purchased.

Front

In terms of resources, what do households provide for firms?

Back

labor

Answer explanation

Households provide labor to firms, which is essential for production. Unlike public services, stocks, or private goods, labor directly contributes to the workforce needed for firms to operate and create goods or services.

Front

In the circular flow model, the product market could describe _____?

Back

stores that sell goods and services to households

Answer explanation

In the circular flow model, the product market refers to stores that sell goods and services to households, where households purchase products. This distinguishes it from labor markets and income flows.

Front

In this market, firms buy resources they need to produce goods and services.

Back

factor market

Answer explanation

The factor market is where firms purchase the resources needed for production, such as labor and raw materials. This distinguishes it from the product market, where goods and services are sold.

Front

IN the picture, what should replace E? Options: Factor Market, Firms, Product Market, Consumers

Back

Product Market

Answer explanation

The correct answer is 'Product Market' because it represents the marketplace where goods and services are exchanged between firms and consumers, which aligns with the context of the question.

Front

In the picture, what should replace A? Options: Factor Market, Product Market, Consumers, Firms

Back

Factor Market

Answer explanation

The correct answer is 'Factor Market' because it represents the marketplace where factors of production (like labor and capital) are bought and sold, which aligns with the context of the question.

Front

Look at the picture. What should replace Y? Options: Consumers, Firms, Factors, Revenue

Back

Firms

Answer explanation

The correct answer is 'Firms' because they are the entities that produce goods and services in the economy, while consumers, factors, and revenue do not fit the context of what should replace Y.