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WorksheetsCFIM Multiple Choice
Total questions: 15
Worksheet time: 23mins
In the circular flow model, the real flow from households to producers is:
wages and salaries
goods and services
factors of production
consumption expenditure
In a circular flow model, if income is at a level where planned investment is greater than planned savings, then:
total income will fall
total income will rise
total income will be unchanged but savings will fall
investment will fall
If exports exceed imports, which of the following is required for the level of income to decrease?
investment to be greater than savings
injections to equal leakages
the government to increase taxation so that it is greater than government expenditure
investment by firms to be greater than household savings
An economic model should be rejected if it:
is based on unrealistic assumptions
is a simplified version of the complex real world
generates misleading conclusions about economic behaviour in the real world
is based on an unrealistic hypothesis
Which of the following is an injection into the circular flow of income?
a growing deficit in the balance of payments (i.e. trade deficit)
an increase in taxes with government expenditure held constant
an increase in household savings
an increase in the level of investment
If firns produce $2000 million worth of goods and services, households consume $1600 million worth of goods and services, and firms want to invest $200 million in a year, then:
savings are $400 million and stock will fall by $200 million
savings are $400 million and stock will rise by $200 million
savings are $200 million and inventories will fall by $200 million
savings are $200 milion and stock will rise by $200 million
Which of the following is NOT an assumption of the two-sector circular flow of income model?
There is no taxation or spending by governments
There is no saving by either households or firms
All items are made from high-quality materials
Firms produce only finished items for sale.
The circular flow of income model demostrates:
that the total level of income cannot change
the way income flows between different sectors of the economy
that all consumers are also producers
the flow of both intermediate and final goods and services
In a simple circular fow where there are just firms, households and a financial sector, equilibrium occurs when:
households are obtaining maximum satisfaction from their incomes
planned saving equals planned consumption
there is full employment of resources
planned investment equals planned savings
During a peak in the economic cycle, an economy is likely to be experiencing all of the following EXCEPT...
growing wages pressure
lower unemployment
lower inflation
higher interest rates
A budget deficit, ceteris paribus, will:
Increase the size of the circular flow
Reduce the size of the circular flow
Will not influence the circular flow
Will increase exports
Which one of the following is a necessary condition for the national income of an economy to be in equilibrium?
There is full employment
The budget of the federal government is planned to balance
There is neither a surplus nor a deficit in the balance of payments
Planned leakages from the circular flow equal to planned injections into it.
In the circular flow model, which of the following, ceteris paribus, does not represent a leakage?
Undistributed profits of producers
Government expenditure on new national highways
An increase in the government budget surplus
Unspent income deposited by households in a bank
If savings amount to $100, investment $150, taxation $200, government expenditure $250 and exports $100, then for the circular flow to be in equilibrium:
Imports should be $200
Taxation should be $250
Investment should be $100
Savings should be $150
If, in an economy, leakages increase and injections fall, ceteris paribus:
the level of economic activity will increase
total output and income will decrease
businesses will find that sales increase because households have more income to spend
the government will have to consider raising taxes to make up for the lost revenue
