Question

1. Economic models The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the Inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Markets for Goods and Services Firms Households Markets for Factors of Production Which of the following is true regarding this economic model? While simple, the circular-flow diagram can still be useful for the purposes of modeling how dollars and resources move throughout an economy. Because it does not take into account the role of government, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy. Because, in reality, the economy is very large, the simplicity of the circular-flow diagram makes it useless for the purposes of modeling how dollars and resources move throughout an economy. Because it does not take into account international trade, the circular-flow diagram is useless for the purposes of modeling how dollar and resources move throughout an economy.

Answer 1

purposes of Mol an economy i when o the Circular-flow diagram can still be useful for the purposes of Modeling how dollars and resources nove throughout an economy. The households earn i money (income) À when firmy purchase or sent these factors of Production to use them to po produce goods and services. firms, earn revenue when seholds buy goods and services. hou