Circular Flow Model

Question 1

Circular flow model

Answer 1

a visual representation of the interrelationships of households and firms

Question 2

Households

Answer 2

one of two principal actors in the economy. Every person is a part of a household

Question 3

Firms

Answer 3

one of two principal actors in the economy. Households become firms when they develop entrepreneurship

Question 4

Market

Answer 4

any time buyers and sellers meet

Question 5

Resources

Answer 5

the factors of production

Question 6

Households contribute land

Answer 6

in the form of natural resources

Question 7

Households contribute labor

Answer 7

in the form of hours worked

Question 8

Households contribute capital

Answer 8

in the form of investments

Question 9

Rents

Answer 9

money companies pay for use of land

Question 10

Wages

Answer 10

money received for hours worked

Question 11

Dividends

Answer 11

return on investments

Question 12

Expenditures

Answer 12

when the household spends its money

Question 13

Revenue

Answer 13

when a firm receives money

Question 14

John Maynard Keynes

Answer 14

Ideas are known as Keynesian Economics
Helped relieve the Great Depression
“Demand makes its own supply”

Question 15

Reasons for importing

Answer 15

1. Cheaper products
2. Products that do not exist in their region
3. Better quality products

Question 16

Reasons for outsourcing

Answer 16

1. Cheap labor
2. Easy access to natural resources
3. Less government regulation