Explain the structure of the circular flow model
What will be an ideal response?
Households own the factors of production and sell the services from them to firms in the factor market. Income earned by households in the factor market is used to purchase goods and services from firms in the goods market. And the revenue the firms gain by selling the goods and services in the goods market is used to pay for the services of the factors of production they hire in the factor markets.
You might also like to view...
Net investment equals
A) capital stock minus depreciation. B) gross investment minus depreciation. C) the total quantity of plant, equipment and buildings. D) gross investment/depreciation.
In the figure above, if the price is $8 a unit, is there a shortage or surplus and what is the amount of any shortage or surplus? What is the equilibrium price and quantity?
What will be an ideal response?
According to the real business cycle theory, an increase in an input price, such as oil, will
A) increase both real Gross Domestic Product (GDP) and the price level. B) increase real Gross Domestic Product (GDP) but not change the price level. C) decrease real Gross Domestic Product (GDP) but increase the price level. D) decrease both real Gross Domestic Product (GDP) and the price level.
If the Federal government enacts a new excise tax of $1.50 per case of soda. Which of the following is most likely to occur?
a. Consumers of soda will pay a higher price and buy a larger quantity. b. Consumers of soda will pay a higher price, which will increase the profits of soda companies, inducing them to sell a larger quantity. c. Consumers of soda will pay a higher price and buy a smaller quantity. d. Consumers of soda will buy less bottled water.