The Circular Flow Model of the Economy

What is the circular flow model of the economy?

• A model showing the flow of traffic in a city

• A model showing the flow of goods, services, resources, and money

• A model showing the flow of water in a river

• A model showing the flow of air in the atmosphere

What are the factors of production?

• Land, labor, capital, and entrepreneurship

• Books, pencils, paper, and erasers

• Water, air, fire, and earth

• Food, clothing, shelter, and transportation

Where do businesses sell their goods and services?

• In the capital market

• In the labor market

• In the product market

• In the factor market

How does the government participate in the circular flow model?

• By producing all the goods in the economy

• By controlling the weather

• By selling goods and services

• By collecting taxes and providing public services

What happens when you buy a coffee at Dunkin' Donuts?

• The coffee is free

• Dunkin' Donuts loses money

• Dunkin' Donuts makes money and pays its employees

• The coffee disappears