Question

A. What do the two cineserings en R. What is the supply, demand, and price of money? C. What functions does government perform D. Name the three markets. E Name the four segments of the economy F. What policies influence the flows in the model? G. What happens to houchold consumer income? H. What are the flows to the international piece of the economy? Circular Flow of Goods

Answer 1

1) the two circles represent goods and services ( consumer) and factors of production ( business)

2) supply: it refers to actual quantity of commodity that supplier willing to sell at a given price at given time period. It is flow of a commodity

Demand : demand is desire backed by ability and willingness and ability to pay for commodity

Therefore demand =desire + ability + willingness to pay for commodity  

Eg if a beggar wants to buy a car it a desire because he cannt afford it, if a doctor want to buy a car and willingness to pay hence it is demand

Price of money : it refers the amount of money that is acquired for a product

3) government function: the main function of government is to provide services to the people. In order to function or run the government they tries to collect taxes in various forms like direct and indirect tax as a source of income. This income is used to run the country, defence, railway, subsidies, pension government school,government hospital , etc are been used,. The government also purchase the service of the household and make transfer payments, unemployment relief, and many other services

4) the three market are product market, factor Market, and capital market

5 ) the four segment of the country are consumption( household), investment ( firms) , government expenditure ( taxes) , net foreign earning ( X-M) export minus import

6) injection and leakages are factor affect the flow in the model

7) household are considered as consumer. Consumer can be individual or group of individual, consumer also related to demand. Consumer uses the goods and services with are produce by using factors of production like land, labor, capital and entrepreneur so the national income is generate in the form of rent, wages, capital and profit.

Transfer payments or net foreign earning refers to import and export. If import are more than export the net foreign earning will be negative. If import are less than export the net foreign earning will be positive hence it is referred to Receipt minus payments

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