Question

The image below shows an expanded circular flow diagram, which tracks how money flows through an economy. To the right is a list of financial transactions completed in the economy. Drag and drop the transactions to indicate where they appear in the flow of money.

Answer 1

Here is the labelled circular flow diagram World Economy An IT company pays for new computers ABC bank borrows $1 Billion from abroad Firms Goods and Services Market Financial System Kat puts $10K into her savings account. Lee pays for a new television. Sarah pays $2K in income tax. John receives $200 in welfare. The $50K to a consultant. The government issues rnment pays in bonds. Explanation In the transaction of government paying money to the consultant, funds are flowing from government for g0ods and services. When the government issues bonds, funds are flowing from financial market to the government When Person J received welfare, funds are flowing from government to household. When Person S pays tax, funds are flowing from household to government When Person L pays for television, funds flow from household to goods and services. When Person K puts $10K in the bank, funds flow from household to financial system. When an IT company pays for new computer, funds flow from firm to goods and services. When a bank borrow funds from abroad, funds flow from world economy to financial system