Question

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8 je Circular Flow of Economic Activity Worksheet 1. Which of the following is NOT one of the three fundamental economic participants a. households b. businesses c. banks d. government 2. The simple circular flow model shows that: a. households are on the selling side of the resource market and the buying side of the product market. b. households are on the buying side of both product and resource markets c. businesses are on the buying side of both product and resource markets d. businesses are on the buying side of the product market and the selling side of the resource market. 3. While resources and products flow in one direction of the circular flow model, what flows in the other direction? a. money B. services c. public goods d. imported goods 4. Which of the following best characterizes the circular flow of income? a. Businesses buy resources from the government, and households buy goods and services from businesses. b. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. c. The government purchases resources from businesses and households and then sells goods and services to businesses and households. d. Households buy factors of production from businesses, and businesses buy goods and services from households. 5. Firms provide a. income to households b. taxes and, goods and services to the government c. goods and services to households d. all the above

Answer 1

Answer

1.c. Banks

In a three sector economy, the three fundamental economic participants are, household sector, business or firm sector, and the government sector.

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5.d. All the above

When the households sell their labor to firms, i.e, work in the firms, they earn wages and salaries from the firms. On the other hand, the households buy goods and services from the firms.The firms pay taxes,like corporate tax, sales tax, etc. to the government.The government buys goods, and services from the firms.

So, the firms provide income to the households, taxes,goods and services to the government, and also goods and services to the households.

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