Circular Flow of Economy Quiz

What do households provide to firms in the circular flow of economy?

• Goods and services

• Labor and capital

• Taxes

• Loans

In the circular flow diagram, what do firms provide to the households?

• Wages, rent, and profit

• Products and services

• Both A and B

• Government policies

What role does the government play in the circular flow of economy?

• It only collects taxes

• It provides public goods and services

• It regulates the economy

• All of the above

Who is responsible for creating demand for goods and services?

• The financial sector

• Households

• Firms

• The government

In the circular flow diagram, how are taxes used by the government?

• To pay government employees

• To provide public goods and services

• To invest in foreign markets

• Both A and B

What is the primary function of the product market in the circular flow of economy?

• To facilitate the exchange of labor and capital

• To allow households to purchase goods and services

• To enable the government to collect taxes

• To provide loans to firms

How do firms contribute to the government sector in the circular flow model?

• By providing public goods

• By paying taxes

• By borrowing money

• By offering services for free

Which of the following best describes the flow of goods and services in the circular flow model?

• From households to firms

• From firms to households

• From government to households

• From households to government

What does the circular flow diagram illustrate about the economy?

• The dependency between different sectors of the economy

• The flow of money and resources between households and firms

• The role of government in economic activities

• All of the above