Circular Flow Model

Households and businesses __________ to the government in exchange for goods

• pay taxes

• earn income

• earn revenue

• pay expenditures

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

In the circular flow model, consumption goods are bought and sold in the

• product market

• financial market

• resource market

• government market

What does box A represent on this Circular flow diagram?

• Households

• Businesses

• Factor Market

• Product Market

What does Box D represent on this Circular flow diagram?

• Households

• Businesses

• Factor Market

• Product Market

What does box C represent on the Circular Flow diagram?

• Firm

• Factor Market

• Individual

• Product Market

Which arrows represent the production and purchasing of goods and services/products in the product market on this circular flow diagram?

• 1, 3, 4, and 2

• 3, 5 7, and 6

• Arrows 5, 6, 7, and 8

• Arrows 2, 5, 7, and 4

Which two arrows represent Goods and services/products to be sold (products being produced) and revenue being received on this Circular Flow Diagram?

• 3 and 4

• 5 and 7

• 1 and 2

• 8 and 5

In this Circular Flow Diagram, the Product Market is on top and the Factor Market is on the bottom. What is being represented by the "red flow line"?

• The flow of money

• The flow of goods and services and the factors of production.

What is being represented by the "red flow lines"?

• the flow of money

• the flow of products and the factors of production