Circular Flow of the National Economy

Circular Flow, GNP and GDP

Multiple Choice

In the circular flow model, households buy products and sell resources

• TRUE

• FALSE

Multiple Choice

The circular flow model

• Assumes that central planning is taking place

• Illustrates how natural resources are created

• Illustrates how money is created by the banking system

• Illustrates the interdependence of businesses and consumers

Multiple Choice

The simple circular flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through product markets

• TRUE

• FALSE

Multiple Choice

Markets in which firms sell their output of goods and services are called product markets

• TRUE

• FALSE

Multiple Choice

In the simple circular flow model, households are sellers of products and demanders of resources

• TRUE

• FALSE

Multiple Choice

Gross national product (GNP) differs from gross domestic product (GDP) in that GNP:

• refers to production by the citizens of a country.

• refers to production within the economy.

• refers to production of goods only.

• refers to production of services only.

Multiple Choice

If Nike, an American corporation, produces sneakers in Thailand this would __________.

• add to neither U.S. GDP nor Thailand's GDP.

• add to Thailand's GDP but not to U.S. GDP.

• count as part of U.S. GDP since it is a U.S. corporation.

• count for both Thailand's GDP and U.S. GDP.

Multiple Choice

Gross domestic product is a measure of the total value of all ________.

• consumer income in an economy over a period of time.

• capital accumulation in an economy over a period of time.

• sales in an economy over a period of time.

• final goods and services produced in an economy over a period of time

Multiple Choice

Gross National Product also measures the activities of the black market.

• TRUE

• FALSE

Open Ended

Why do we have to account our national income?