Economics Circular Flow

Use the diagram to answer the question below. Which term best completes this economic flow?

• taxes

• income

• savings

• investment

What is the primary function of the circular flow model in economics?

• To illustrate the flow of goods and services in an economy

• To predict future economic trends

• To determine the value of a country's currency

• To calculate the gross domestic product

In the circular flow model, households provide which of the following to firms?

• Goods and services

• Labor, land, and capital

• Government regulations

• Foreign exchange

Which of the following best describes the role of firms in the circular flow model?

• They consume goods and services

• They provide labor and capital

• They produce goods and services

• They regulate the economy

In the circular flow model, what do households receive in exchange for providing factors of production?

• Goods and services

• Wages, rent, and profit

• Government subsidies

• Foreign investments

Which of the following is a leakage in the circular flow model?

• Investment

• Government spending

• Exports

• Savings

What is an injection in the circular flow model?

• Taxes

• Imports

• Savings

• Government spending

How does the circular flow model illustrate the concept of equilibrium in an economy?

• By showing the balance between supply and demand

• By demonstrating the equality of injections and leakages

• By predicting economic growth

• By calculating the national income

In the circular flow model, what role do financial institutions play?

• They provide goods and services

• They facilitate the flow of money between households and firms

• They regulate international trade

• They set government policies

Which of the following represents a real-world application of the circular flow model?

• Analyzing the impact of a new tax policy

• Predicting weather patterns

• Designing a new technology

• Studying animal behavior