Circular Flow Model Practice

What are the two main sectors in the basic circular flow model?

• Government and financial
• Households and firms
• Firms and the foreign sector
• Households and the government

In the circular flow model, households provide what to firms?

• Goods and services
• Taxes
• Factors of production
• Investment capital

What do firms provide to households in return for factors of production?

• Imports
• Subsidies
• Income
• Savings

Injections in the circular flow of income include:

• Savings, taxes, and imports
• Investment, government spending, and exports
• Consumption, imports, and savings
• Taxes, investment, and subsidies

Leakages in the circular flow of income include:

• Government spending and taxes
• Imports, taxes, and savings
• Exports, investment, and consumption
• Injections and income

What role does the financial sector play in the circular flow model?

• It taxes businesses and households.
• It provides exports and imports.
• It channels savings into investment.
• It produces goods and services.

Which of the following is an example of a leakage?

• Export payments
• Business investment
• Savings deposited in a bank
• Government subsidies

What is the impact of increased leakages without corresponding injections?

• Economic expansion
• Inflation
• A slowdown in the circular flow
• Greater income equality

What is the purpose of injections in the economy?

• To reduce household income
• To increase the circular flow of income
• To reduce GDP
• To decrease government spending

Which of the following is an example of an injection?

• Households paying taxes
• Firms saving profits
• Government building a new highway
• Consumers buying imported goods