Circular Flow Model Quiz

In the Circular Flow Model of the economy, what role do households play?

• They supply goods and services to firms.

• They supply factors of production to firms.

• They represent the government's role in the economy.

• They produce goods and services for export.

Which of the following is not a factor of production in the Circular Flow Model?

• Labor

• Capital

• Money

• Land

In the Circular Flow Model, what do firms provide to households in exchange for the factors of production?

• Goods and services

• Income in the form of wages, rent, interest, and profit

• Money for savings

• Government services

If the government increases taxes on households, how would it impact the Circular Flow Model?

• It would lead to higher household savings.

• It would decrease household consumption.

• It would have no impact on the model.

• It would reduce the amount of money in the economy.

What happens in the Circular Flow Model if there is an increase in exports (goods sold to foreign countries)?

• It leads to a decrease in the flow of money within the domestic economy.

• It increases the flow of money into the domestic economy.

• It reduces the production capacity of firms.

• It has no effect on the model.