Circular Flow of Economic Activity

What do the households provide businesses?

• Labour
• Wages
• Resources
• Goods and services

Resource markets are LEAST LIKELY to sell

• land.

• capital.

• goods and services

• labor and entrepreneurs.

Using this diagram, what outcome can be predicted if individuals stopped purchasing goods?

• Businesses would lose income.

• Businesses would produce less goods.

• Businesses would not be able to pay for resources.

• Businesses would experience all of these economic outcomes.

James works at an automobile factory. Every day he goes to work and inspects the machines at the factory to make sure they are running smoothly. At the end of the every week, James is paid by his boss, Bill, for his good work. James takes his paycheck to the bank every Friday and deposits most of it, but keeps a little bit of spending money. He then takes his wife, Julie, out for dinner, using the leftover money from his paycheck.

According to the circular flow of economics, which market is James participating in with his boss, Bill?

• Stamp Market

• Factor Market

• Product Market

• Automobile Market

In the product market,

• productive resources are bought and sold.

• producers sell goods and services to consumers.

• a nation's total output of goods and services increases.

• the amount of output produced by a given amount of inputs is measured.

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

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.

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