What does a circular-flow diagram do?○ It illustrates cost-benefit analysis.○ It explains how the economy is organized.○ It shows the flow of trade in the world.○ It explains how banks circulate money in the economy.

Answered: What does a circular-flow diagram do? ○…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What does a circular-flow diagram do?
○ It illustrates cost-benefit analysis.
○ It explains how the economy is organized.
○ It shows the flow of trade in the world.
○ It explains how banks circulate money in the economy.

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Introduction

The economic model with significant exchanges occurring between the economic units is referred to as the circular flow of income. Only the interactions between households and businesses are included in the fundamental model of the circular flow of money. In this model, the flow of money and goods is depicted. Firms, households, the government, financial institutions, and the rest of the world are included in the five sector model of the circular flow of revenue.

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