2.3 The Circular Flows
1) ________ the owners of the factors of production, while ________ what amounts of those factors to hire.
A) Households are; firms determine
B) Households are; the government determines
C) The government is; firms determine
D) Firms are; households determine
E) Firms are; the government determines
2) What two groups of decision makers are represented in the basic circular flow model?
A) governments and financial institutions
B) lenders and borrowers
C) wholesalers and retailers
D) bankers and regulators
E) households and firms
3) Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market
A) requires a physical location for buyers and sellers to get together.
B) is any arrangement that brings buyers and sellers together.
C) must include a written contract between buyers and sellers.
D) is only a place to purchase groceries.
E) must have many buyers and only one seller, who is willing to sell to all the buyers.
4) The decisions of firms and households are
A) coordinated by markets.
B) made independently of one another.
C) controlled by but not totally coordinated by the government.
D) unexplainable by the circular flow model.
E) coordinated by but not totally controlled by the government.
5) The circular flow model is used to show the
A) flow of renewable natural resources.
B) recycling process of production materials.
C) expansions and contractions of economic activity.
D) flow of expenditures and incomes in the economy.
E) flow of supply and the flow of demand.
6) The circular flow model shows the
A) distribution of income and consumption goods across income levels.
B) combinations of the factors of production needed to produce goods and services.
C) flow of expenditure and incomes that arise from the households', firms', and governments' decisions.
D) flow of natural resources from firms to the private market to government and back to firms.
E) distribution of income to the different factors of production.
7) The circular flow model shows the flow of
A) expenditure and income throughout the economy.
B) only money throughout the economy.
C) only funds in stock and bond markets.
D) only tax payments and government expenditures.
E) goods markets and factor markets as they move through the economy.
8) In the circular flow model, there are two types of markets: the ________ market and the ________ market.
A) producers; consumers
B) households; firms
C) service; goods
D) goods; factor
E) supply; demand
9) In the circular flow model, consumption goods are bought and sold in the
A) goods market.
B) financial market.
C) factor markets.
D) government market.
E) monetary flows.
10) In the circular flow model, which of the following is on the buying side in the goods market?
i.firms
ii.households
iii.federal, state, and local governments
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
