Circular Flow of a Market Economy

Why are entrepreneurs needed in the economy?

• They create jobs

• They increase competition

• They drive innovation

• All of the above.

What are the two main sectors involved in the economic flow as shown in the diagram?

• A) Government and Firms

• B) Household and Firms

• C) Banks and Firms

• D) Household and Government

In the economic flow diagram, what do 'Factor Payments' include?

• A) Taxes and Subsidies

• B) Rent, Wages, Interest, Profit

• C) Savings and Investments

• D) Imports and Exports

What do households own in a free market economy?

• Finished products

• Factors of Production (land, labor, and capital)

• Goods and Services

• Consumer Purchases.

In the circular flow of a market economy, what do firms produce?

• Inputs

• Factors of Production

• Finished products

• Consumer Purchases

What is exchanged in a Product Market?

• Factors of Production for money

• Finished products for money

• Services for goods

• Labor for capital

In a Factor Market, what is exchanged for money?

• Finished products

• Goods and services

• Factors of Production

• Consumer purchases

What is the role of firms in the product market?

• Pay for goods and services

• Supply goods and services to households

• Consume goods and services

• Regulate the market

In the circular flow of a market economy, what do households do?

• Supply goods and services

• Pay firms for goods and services

• Regulate the market

• Produce goods and services

What do households supply to firms in a market economy?

• Goods and services

• Labor, land, and capital

• Monetary exchange

• Consumer purchases.