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Questions and Answers
What is the circular flow of income model?
What is the circular flow of income model?
- A model representing the exchange of goods and services in the economy
- A model representing flows of money, goods and services between economic agents (correct)
- A model representing the flow of money within an economy
- A model representing the distribution of income among individuals
What do the flows of money and goods exchanged in the circular flow correspond in value?
What do the flows of money and goods exchanged in the circular flow correspond in value?
- They correspond in value and run in opposite directions (correct)
- They do not correspond in value
- They correspond in value but are unrelated to direction
- They correspond in value and run in the same direction
Who developed the concept of circular flow in the so-called Tableau économique?
Who developed the concept of circular flow in the so-called Tableau économique?
- François Quesnay (correct)
- Richard Cantillon
- John Maynard Keynes
- Karl Marx
What is the basis of national accounts and macroeconomics?
What is the basis of national accounts and macroeconomics?
In its most basic form, what does the circular flow model consider?
In its most basic form, what does the circular flow model consider?
Flashcards
Circular Flow of Income Model
Circular Flow of Income Model
A model that illustrates the flow of money, goods, and services between economic agents.
Correspond in Value
Correspond in Value
The monetary value of goods and services moving one way equals the monetary value moving the opposite way.
Who developed the circular flow?
Who developed the circular flow?
François Quesnay developed the circular flow concept in his 'Tableau économique'.
Basis of National Accounts
Basis of National Accounts
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Basic Circular Flow
Basic Circular Flow
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Study Notes
Circular Flow of Income Model
- The circular flow of income model is a graphical representation of the economy, showing the flows of income and expenditures between different sectors.
Key Characteristics
- The flows of money and goods exchanged in the circular flow correspond in value, meaning that the total value of goods and services produced is equal to the total value of income earned.
Development of Circular Flow
- The concept of circular flow was developed by French economist François Quesnay in the so-called Tableau économique, a visual representation of the economy.
National Accounts and Macroeconomics
- The circular flow of income model is the basis of national accounts and macroeconomics, as it provides a framework for understanding the economy at the aggregate level.
Basic Form of Circular Flow
- In its most basic form, the circular flow model considers the interactions between households and businesses, including the flows of income, expenditures, and production.
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