Circular Flow and Trade Balance

In the circular flow model, what is the primary role of households?

• To consume goods and services and provide factors of production

• To produce goods and services

• To consume goods and services and provide labour to the firms sector

• To control inflation and interest rates

Label the sectors of the Circular flow model.

a

b

c

d

f

Financial

Firms

Household

Business

Trade

Government

Overseas

What happens when injections (investment, government expenditure, and exports) exceed leakages (savings, taxes, and imports)?

• The economy shrinks

• Unemployment increases

• The exchange rate drops

• The Economy Grows

The financial sector in the circular flow model is responsible for managing​ the flow of​ (a)   and​ Investments .

• savings
• collecting taxes
• implementing laws
• exports
• imports

The Reserve Bank of Australia (RBA) carries out which policy?

• Fiscal Policy

• Union Policy

• Monetary Policy

If the Government spends more than it receives in taxes, this is called a _____

How do imports affect the circular flow in the Australian economy?

• They act as a leakage by sending money out of the economy

• There is no impact on the economy

• They act as an injection into the economy

• It creates more jobs in the firms sector

Which of the following is an example of an injection into the economy?

• Taxes being paid

• Government builds a new hospital

• An Australian company exporting goods overseas

• Households saving money in a bank

When the Government spends less than it receives from taxes, this is called a​ (a)  

• Surplus
• Deficit

Why is government spending considered an injection in the circular flow model?

• It reduces household spending

• It creates more opportunities to Import

• It increases business revenue and economic activity