The following diagram presents a circular-flow model of a simple economy. The ou
ID: 1137992 • Letter: T
Question
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
1)Based on this model, households earn income when_____________(firms/housholds) purchase _____________ (firms/housholds) in markets for factors of production.
Suppose Latasha earns $525 per week working as a jewelry appraiser for Classy's Jewelry Store. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Jake $450 per week to wait tables. Jake uses $200 to purchase a necklace from Classy's Jewelry Store.
Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.
2)
Event
Market for Factors of Production
Market for Goods and Services
3)Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs. Check all that apply.
a.Latasha's labor
b.The $450 per week Jake earns working for Little Havana
c.The $200 Jake spends to purchase a necklace from Classy's Jewelry Store
4)True or False: Gross domestic product (GDP) measures total expenditures on final goods and services during a given period of time.
Event
Market for Factors of Production
Market for Goods and Services
Jake earns $450 per week working for Little Havana. Latasha earns $525 per week working for Classy's Jewelry Store. Jake spends $200 to purchase a necklace from Classy's Jewelry Store. Markets for Goods and Services Firms Households Markets for Factors of ProductionExplanation / Answer
1. Answer to blank 1: firms
Answer to blank 2: households
2.
3.
4. Ans: True
Explanation:
GDP is the the market value of all the final goods and services produced by a country within a specific time period.
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