What is a circular flow diagram and what does it demonstrate?
What will be an ideal response?
A circular flow diagram is a model that illustrates how participants in markets are linked. It shows who supplies and purchases factors of production and who supplies and purchases goods and services.
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Suppose a market is in equilibrium. If a price floor is set in this market below the equilibrium price, it is likely that:
A) quantity demanded will increase. B) a surplus will arise. C) a shortage will arise. D) the quantity sold will rise. E) the market will remain in equilibrium.
In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that
A) aggregate demand has decreased. B) aggregate supply has decreased. C) aggregate demand has increased. D) aggregate supply has increased.
Best Lights wants to prevent Bright Lights from entering the light bulb market. If Best Lights expands its capacity, the expansion can lead to all of the following except which one?
A) decrease Bright Lights' profit from entering the market B) lower Best Lights' profit-maximizing price C) lower Best Lights' profit-maximizing quantity D) lower Best Lights' marginal cost
One explanation for the increased participation of married women in the U.S. labor force is that
a. fewer women are being trained for household work by the public school system b. rapid growth in the service sector has provided additional job opportunities for women c. the cost of professional day care has increased d. couples are having more children e. husbands earn more today than they did previously