In the circular flow model, which of the following items is a real flow?
A. The flow of government expenditures to firms for the goods bought
B. The flow of income from firms to households for the services of the factors of production hired
C. The flow of U.S. borrowing from the rest of the world
D. The flow of labor services from households to firms
D Answer D is a real flow because it is a labor service.
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Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:
a. earn an economic profit. b. continue to operate in the short run. c. shut down. d. all of these are true.
If Dana can paint his house faster than Luke, a professional house painter, then:
a. Dana has a comparative advantage in house painting. b. Dana has an absolute advantage in house painting. c. Luke has a comparative advantage in house painting. d. Luke has an absolute advantage in house painting. e. Dana should always paint his own house.
If the inflation rate in the U.S. is lower than in other countries, this would be expected to
A. increase U.S. exports. B. reduce U.S. imports. C. increase the demand for dollars. D. All of the choices are true.
Answer the following statements true (T) or false (F)
1. Business cycles refer to short term fluctuations in prices. 2. Real GDP can change due to changes in the price level. 3. If nominal GDP is rising faster than real GDP, then inflation must be occurring. 4. Real GDP is calculated using current prices of outputs. 5. Inflation refers to an increase in the overall level of prices.