Question

1. The expanded circular-flow diagram Aa Aa The diagram below shows an expansive circular-flow diagram for the U.S. economy, with arrows pointing in the direction that money flows. To facilitate reference, letter labels have been placed on certain arrows of the diagram Government purchases of goods and services Government borrowing Government Taxes Government transfers Private savings Households Wages, profit, interest, Consumer spending rent Markets for goods and services Factor markets Financial markets Gross Wages, profit, interest, rent domestic Borrowing and stock issues by firms product Firms Investment spending Foreign borrowing and sales of stock Exports Rest of world Foreign lending and purchases of stock Imports purchases of stock Which one of the following arrows best represents the flow of money when people in China purchase U.S. government bonds? O D O C On the circular-flow diagram above, disposable income can be used for two purposes; one of these has an arrow labeled as exports consumer spending investment spending taxes QNA 3.16 2004-2016 Aplia. All rights reserved 2013 Cengage Learning except as noted. All rights reserved. Grade It Now Save & Continue

Answer 1

Buying and selling of government bonds comes under financial sector.

When people in China purchases US government bond will be considered as a outflow from the US financial sector to Rest of the World (under which China is come).

This outflow is represented by the arrow A

Answer: option (B).

On the circular flow diagram above, disposable income can be used for two purposes; one of these has an arrow labeled as consumer spending.