Explanation Option (a): The circular flow model shows the monetary flows of economy. According to the model, it considers four sectors, such as households, product market, business and factor market, which is closely related to each other in a transaction process. Then, it is clear that the model does not include the shoes in inventory. This is because it a stock rather than a flow. Thus, option ‘a’ is correct. Option (b): The circular model consider the total wage paid per month. This is because in this case, the household will sell its factors of production such as labor, land, and capital and it earns wage and rent, return as income. The question asked for the process which not included in the circular flow model. Thus, option ‘b’ is incorrect. Option (c): According to the circular flow model, a business can earn its profit by selling product to the product market...

The circular flow model.

Economics For Today

9th Edition

ISBN: 9781305507074

Author: Tucker, Irvin B.

Publisher: Cengage Learning,

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Chapter 15, Problem 8SQ

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The circular flow model.

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Chapter 15, Problem 7SQ

Chapter 15, Problem 9SQ

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