What are the four sectors in a more complex circular-flow diagram? a. households

Question

What are the four sectors in a more complex circular-flow diagram?

a. households, government, financial markets, and international trade

b. households, firms, government, and financial markets

c. households, firms, financial markets, and international trade

d. households, firms, government, and international trade

If a tax is levied on the seller of a product, what will happen to the demand curve and the supply curve?

a. Demand will not change and supply shifts to the left

b. Demand will not change and supply shifts to the right.

c. Demand shifts to the left and supply will not change.

d. Demand shifts to the right and supply will not change.

Explanation / Answer

The four sectors in a more complex circular-flow diagram are d. Households, firms, government, international trade and the three markets are Product market, Finance market and Resource Market. Hence 'd' is the correct option.

If tax is levied on sellers then the sellers tend to produce less because the tax burden is directly on the sellers. Hence the supply curve shifts to left and the demand will not change. If the same tax is levied on the consumer then the demand shifts leftwards and supply remain unchanged. Hence, in this case correct option is 'a'.

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