Question

1)

Households are vital to the circular flow model in what two ways?

• They export goods and services and import goods and services.

• They supply factors of production and purchase goods and services.

• They vote for political officers and pay taxes.

• They facilitate exchange between consumers and firms.

2)

Scarcity requires that we:

• change our fiscal policy until the situation of scarcity is eliminated.

• make decisions in order to arrange our resources rationally.

• adopt economic policies that will lead to unlimited resources.

• make sure we only want things that we are capable of consuming and producing.

3)

In order to understand when a model may not be accurate, which is not an important action to take?

Multiple Choice

• Identify what important details were omitted when developing a model.

• Make sure the model all includes all possible details.

• Test the model for accuracy.

• Make sure assumptions made in the model are clear and accurate.

Answer 1

1. The correct option is They supply factors of production and purchase goods and services as households helps in supplying factors of production and purchasing goods and services.

2. The correct option is make decisions in order to arrange our resources rationally as scarcity is utilizing the resources rationally without wasting any resources.

3. The correct option is Make sure assumptions made in the model are clear and accurate as other options shows what you would do when the model is inaccurate.

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