Circular Flow of Income

Which statement is true about the circular flow diagram?

• A  Households are demanders in the product market and suppliers in the factor market
• A  Business are demanders in the product market and suppliers in the factor market.
• A  Households are demanders in the factor market and suppliers in the product market.
•  A  Businesses and households are not components of the circular flow diagram.

Which arrows on this diagram would represent the transaction between Joe who rents his office to Homework Inc., a company that provides tutoring services?

• 2,3
• 4,7
• 1,2
• 5,6

Arrows 4 and 7 on this circular flow diagram demonstrate

• prices
• taxes
• goods and services flow
• money flow

The arrows 1 to 2 in this diagram represent which aspect of the economy?

• goods and services flow
• money flow
• taxes
• factors of production

Place where buyers and sellers meet to exchange goods and services for money

• Market
• Factor of production
• Money
• Interdependent

What is being represented by the "red flow line"

• The flow of money
• The flow of goods and services
• Taxes
• Productive resources

What is being represented by the "green flow lines"

• Flow of Money
• Flow of Goods and Services
• Taxes
• law

In the circular flow model, what do individuals sell to the factor market

• Services
• Money
• Productive Resources
• goods

In the products market,

• firms buy goods and services from households
• firms sell goods and services to households
• firms sell resources to households
• firms buy resources from households

The circular flow model of a market economy shows

• how profits are made
• what inputs are required for what outputs
• how many firms can support the needs of how many households
• the interactions between households and  firms in the free market