Mod 10 Quiz

Which of the following is false about the circular-flow diagram?

• Households are the primary demanders of goods and services.

• Firms are the primary suppliers of goods and services.

• Money flows from households to firms as households offer factors of production for sale.

• Money flows in the opposite direction as goods and services and factors of production.

• Household savings is considered an injection of money into the circular flow.

Which are the two markets represented in the simplest circular-flow diagram?

• The market for goods and services and the market for factors of production.

• The markets for households and firms.

• The market for money and the market for goods and services.

• The market for factors of production and the market for money.

• The market for goods and services and the market for human capital.

An example of a government transfer is a(n):

• expenditure on an interstate highway.

• bequest from a deceased relative.

• Social Security payment.

• salary for members of the armed forces.

• salary earned as an economist with a government agency.

Transfer payments:

• are a means by which government raises funds.

• represent a redistribution of funds from one individual to another individual in the economy.

• are counted in GDP.

• is another term for government taxation.

• reduce a household’s ability to purchase goods and services.

Gross domestic product is defined as:

• consumer spending + government purchases + financial spending + exports – imports.

• consumer spending + government transfers + investment spending + exports – imports.

• disposable income + taxes + investment spending + exports + imports.

• consumer spending + government purchases + investment spending + exports – imports.

• consumer spending + government purchases + investment spending + imports– exports.