Circular Flow of Income Quiz

The circular flow of income is the continuous movement of money between households and businesses, where firms pay households wages and households spend on goods and services.

During economic downturns, the circular flow of income contracts, resulting in reduced income and expenditure.

Simple circular flow models assume that households and businesses do not save, government involvement is excluded, and there is no foreign trade.

<p>The entities involved in the circular flow of income include households, firms, governments, and the rest of the world.</p> Signup and view all the answers

<p>Changes in the volume of the circular flow of income reflect changes in national income.</p> Signup and view all the answers

<p>Money acts as a medium of exchange, facilitating the exchange of goods and services.</p> Signup and view all the answers

<p>Households supply resources like land, capital, and labor to businesses and receive payments in return.</p> Signup and view all the answers

<p>Businesses produce goods and services that households purchase.</p> Signup and view all the answers

<p>Resources flow from households to businesses, while goods and services flow from businesses to households.</p> Signup and view all the answers

<p>Households receive payments such as wages, rent, interest, and profits.</p> Signup and view all the answers

<p>It demonstrates the interdependence and continuous exchange between households and businesses.</p> Signup and view all the answers

<p>The flow of money is crucial for the smooth functioning of the economy and affects national income.</p> Signup and view all the answers

<p>It illustrates the flow of resources and the corresponding flow of money between households and businesses.</p> Signup and view all the answers

<p>Households supply resources such as land, labor, capital, and entrepreneurship.</p> Signup and view all the answers

<p>The real flow of resources, goods, and services moves in one direction while monetary flow moves in the opposite direction.</p> Signup and view all the answers

<p>Money acts as a medium of exchange, facilitating the transaction of goods and services.</p> Signup and view all the answers

<p>During periods of economic prosperity, the volume of the flow of income is usually high.</p> Signup and view all the answers

<p>Factor markets are where the interaction between factors of production and the firms that use them occurs.</p> Signup and view all the answers

<p>Circular flow refers to the continuous exchange of resources, money, goods, and services between households and businesses.</p> Signup and view all the answers

<p>The flow of income decreases during economic depression.</p> Signup and view all the answers

<p>Components include households, business firms, and the flow of income and resources.</p> Signup and view all the answers

<p>The household sector provides factors of production to businesses and consumes goods and services.</p> Signup and view all the answers

<p>Businesses generate revenue by selling goods and services to the household sector.</p> Signup and view all the answers

<p>The government sector regulates, collects taxes, and purchases goods and services.</p> Signup and view all the answers

<p>Real flows are the flows of factors of production and goods/services between sectors.</p> Signup and view all the answers

<p>Money flows encompass the monetary exchanges between sectors in the economy.</p> Signup and view all the answers

<p>Product markets are where goods are exchanged between businesses and households.</p> Signup and view all the answers

<p>Resource markets are where factors of production, like labor and capital, are bought and sold.</p> Signup and view all the answers

<p>Households supply land, labor, capital, and organization to businesses in exchange for income.</p> Signup and view all the answers

<p>Households are the sole buyers of goods and services and the sole suppliers of factors of production.</p> Signup and view all the answers

<p>Businesses generate revenue by selling goods and services to households.</p> Signup and view all the answers

<p>The two main sectors are the household sector and the business sector.</p> Signup and view all the answers

<p>Households obtain income from the business sector as payment for the services of the factors of production they supply.</p> Signup and view all the answers

<p>Resource markets facilitate the exchange of services of economic resources like labor, capital, and land.</p> Signup and view all the answers