Below shows the schematic diagram of the circular flow of income. The functioning of the free-market economic system is represented with firms and households and interaction back and forth (Ventures, 2012). Evaluate the diagram of the circular flow model below and answer the questions which follow. Questions 1) Part 1) What does the circular flow model describes? Part 2) Relate the role of each factor markets for factor of production. Part 3) Assess the flows of products, resources, and money payments in the circular flow model above.
Below shows the schematic diagram of the circular flow of income. The functioning of the free-market economic system is represented with firms and households and interaction back and forth (Ventures, 2012). Evaluate the diagram of the circular flow model below and answer the questions which follow. Questions 1) Part 1) What does the circular flow model describes? Part 2) Relate the role of each factor markets for factor of production. Part 3) Assess the flows of products, resources, and money payments in the circular flow model above.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Below shows the schematic diagram of the circular flow of income. The functioning of the free-market economic system is represented with firms and households and interaction back and forth (Ventures, 2012). Evaluate the diagram of the circular flow model below and answer the questions which follow.
Questions 1)
Part 1) What does the circular flow model describes?
Part 2) Relate the role of each factor markets for factor of production.
Part 3) Assess the flows of products, resources, and money payments in the circular flow model above.
Transcribed Image Text:FIGURE 1: The Circular-Flow Diagram
Revenue (=GDP)
Spending (=GDP)
Markets for
Goods &
G & S
sold
G & S
bought
Services
Firms
Households
Factors of
Labor, land,
сapital
production
Markets for
Factors of
Production
Income (=GDP)
Wages, rent,
profit (=GDP)
CHAPTER 23 MEASURING A NATION'S INCOME
8
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