Circular Flow Questions
1
Which of the following is true regarding the circular
flow model?
Households provide the demand for the factor market and business provide the supply for the goods and
services market
Households provide the demand for the goods and service market and business provides the supply for the
factor market
Households provide the supply for the factor market and business provides the supply for the goods and
service market
Households provide both the supply and demand for the goods and services market
2
Which of the following is true
Income flows from firms to households in the goods and services market
Income flows from firms to households in the factor markets
Income flows from households to firms in the factor market
Income flows from households to households in the factor market
3
The factor market is where
Goods and Services flow to households
Business supplies resources to households
Households provide resources to business
Households supply goods to business
4
Households receive income from government by
Selling government goods and services
Providing government with income taxes
Receiving services from government
Receiving transfer payments from government
5
Which of the following statements is true?
Government receives most of its revenues from the factor market
Government receives most of its revenues from the product market
Government receives most of its revenues from transfer payments
Government receives most of its revenues from household and business taxes
6
Which of the following statements is true?
Firms receive money from government only when firms sell goods and services
Firms receive money from government only when government provides grants and subsidies
Firms receive money from government when government buys goods and services and also when
government provides firms with grants and subsidies
Firms receive money only from households
7
Which of the following statements is true?
Government is never part of the demand for goods and services
Government is part of demand only in the factor parkets
Government is part of demand only in the goods and services market
Government is part of demand in both the goods and services market and the factor market
8
Financial capital flows into financial institutions from:
domestic households, domestic firms, and sources outside the country
only households
only domestic firms
only households and domestic firms
9
A country's imports are:
goods that flow out of the country
goods that flow into the country
goods that are domestically produced
goods that are consumed outside the country
10
A country's exports are:
goods that flow out of a country
goods that flow into a country
goods that are produced outside a country
goods that are consumed within a country
11
Income and revenues that are created within a country
always will remain within that country
can leave that country only when goods are exported
can leave that country when goods are imported
can leave that country when capital flows into that country's financial institutions
12
When households use income that they receive from the
factor market to buy imports
it leaves more dollars available for purchases in the domestic product market
it leaves fewer dollars available for purchase in the domestic product market
it has no effect on purchases in the domestic market
it leads to higher prices in the domestic market
13
When goods are exported
it creates revenues and income for domestic producers and workers
it creates more revenues for domestic firms but not more income for domestic households
It creates more income for domestic households but less revenues for domestic firms
it leads to a loss of domestic jobs
14
When a country imports more goods than it exports
More of the income to domestic households is available to purchase goods and services in the domestic
product market
Less of the income to domestic households is available to purchase goods and services from the domestic
product market
there is no effect on the demand for goods and services in the domestic product market
more money will be available to the domestic households
15
In a circular flow model, the real variables are:
money that flows from the factor market to the households
only the goods and services that are produced.
only the resources that are used
both the goods and services produced and the resources that are used