Circular Flow of Income Model Quiz

Which of the following sectors is NOT included in the circular flow of income model?

• Household sector

• Firms sector

• Technology sector

• Government sector

What is a closed economy?

• An economy with no government intervention

• An economy with no international trade

• An economy with no financial institutions

• An economy with no household sector

Which sector consists of all private business enterprises that produce and distribute goods and services to consumers?

• Household sector

• Firms sector

• Finance sector

• Government sector

What is the primary role of the finance sector in the circular flow of income model?

• Producing goods and services

• Borrowing and lending money

• Providing public services

• Exporting and importing goods

Which sector is responsible for raising revenue through taxes, rates, fees, and charges?

• Household sector

• Firms sector

• Finance sector

• Government sector

What do trade flows refer to in the overseas sector?

• Borrowing and lending of money

• Sale and purchase of financial assets

• Exports and imports of goods and services

• Production of goods and services

In the simple two-sector model, which of the following is NOT an assumption?

• Households spend all their income on goods and services.

• There is no government sector.

• Firms produce goods and services.

• Households save a portion of their income.

In the three-sector model, what does the term "leakage" refer to?

• Income not spent on consumption.

• Income spent on goods and services.

• Income saved by households.

• Income invested by firms.

According to the three-sector model, what happens when savings (S) are greater than investment (I)?

• Income will rise.

• Income will fall.

• Income will remain the same.

• Income will double.

In the three-sector model, equilibrium is defined as a situation in which:

• S = I

• Y = E

• C = I

• S = C