the circular flow of goods and incomes shows the relationship between
Mohammed
Guys, does anyone know the answer?
get the circular flow of goods and incomes shows the relationship between from screen.
The circular flow of goods and incomes shows the relationship between?
A. Wages and salaries. B. income and money C. goods and services. firms and households
Search
Search PAKMCQS MENU
English Mcqs Maths Mcqs
General Knowledge MCQs
Pakistan Current Affairs MCQs
World Current Affairs MCQs
Pak Study Mcqs
Islamic Studies Mcqs
Computer Mcqs
Everyday Science Mcqs
Physics Mcqs Chemistry Mcqs Biology Mcqs Pedagogy Mcqs URDU Mcqs
Management Sciences
Finance Mcqs HRM Mcqs Marketing Mcqs Accounting Mcqs Auditing Mcqs
Engineering Mcqs
Electrical Engineering Mcqs
Civil Engineering Mcqs
Mechanical Engineering Mcqs
Chemical Engineering Mcqs
Software Engineering Mcqs
Medical Subjects
Medical Mcqs Biochemistry Dental Materials
General Anatomy Mcqs
Microbiology Oral Anatomy Oral Histology
Oral Pathology and Medicine
Physiology Mcqs Pathology Pharmacology
OTHER SUBJECTS
Psychology Mcqs Agriculture Mcqs Economics Mcqs Sociology Mcqs
Political Science Mcqs
Statistics Mcqs
English Literature Mcqs
Judiciary And Law Mcqs
SUBMIT MCQS
Submit Mcqs
Follow us on Facebook!
Follow us on Facebook!PAKMCQS QUIZ
ISLAMIC STUDIES MCQS QUIZ
GENERAL KNOWLEDGE QUIZ
PAKISTAN STUDIES QUIZ
EVERYDAY SCIENCE QUIZ
COMPUTER ONLINE QUIZ
Top Contributors
Top Contributors ELECTION OFFICER
Election Officer Mcqs
The circular flow of goods and incomes shows the relationship between: a. Income and money. b. Wages and salaries. c. Goods and services. d. Firms and households.
Answer to: The circular flow of goods and incomes shows the relationship between: a. Income and money. b. Wages and salaries. c. Goods and...
Social sciences
The circular flow of goods and incomes shows the relationship between: a. Income and money. b....
The circular flow of goods and incomes shows the relationship between: a. Income and money. b.... Question:
The circular flow of goods and incomes shows the relationship between:
a. Income and money.
b. Wages and salaries.
c. Goods and services.
d. Firms and households.
Circular flow model
The circular flow model illustrates how money circulates in an infinite cycle between producers or businesses and households before returning to them. Understanding how money circulates within an economy is the circular flow model's main goal.
Answer and Explanation:
Become a Study.com member to unlock this answer! Create your account
View this answer
The correct option is d.
Households' own factors of production whereas the firms use factors of production. Firms will use production factors to...
See full answer below.
Become a member and unlock all Study Answers
Start today. Try it now
Create an account
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question
Search Answers
Learn more about this topic:
Circular Flow Model in Economics: Definition & Examples
from
Chapter 3 / Lesson 28
17K
In economics, the circular flow model demonstrates how resources, money, credit, goods, and services move through the economy. Learn more about this concept's definition and look at some examples of a circular flow model.
Related to this Question
Which of the following income statement elements is an economic inflow that occurs from the sale of goods or services? a. net income b. revenue c. comprehensive income d. gain
The income statement of Gopitkumar Co. for the month of July shows net income of $2,900 based on Service Revenue $6,600, Salaries and Wages Expense $2,100, Supplies Expense $1,100, and Utilities Expen
The income statement of Gopitkumar Co. for the month of July shows net income of $3,000 based on Service Revenue $7,000, Salaries and Wages Expense $2,200, Supplies Expense $1,400, and Utilities Expen
The income statement of Gopitkumar Co. for the month of July shows net income of $2,200 based on Service Revenue $6,100, Salaries and Wages Expense $2,300, Supplies Expense $1,000, and Utilities Expen
The income statement of Montee Co. for the month of July shows net income of $2,300 based on Service Revenue $6,400, Salaries and Wages Expense $2,100, Supplies Expense $1,400, and Utilities Expense $
The income statement of Norski Co. for the month of July shows net income of $2,000 based on Service Revenue $5, 500, Salaries and Wages Expense $2,100, Supplies Expense $900, and Utilities Expense $5
The income statement of Garska Co. for the month of July shows net income of $3,970 based on Service Revenue $8,400; Salaries and Wages Expense $2,700; Supplies Expense $960; and Utilities Expense $77
The income statement for Weeping Willow Golf Club for the month ending July 31 shows Service Revenue $16,158, Salaries and Wages Expense $8,242, Maintenance and Repairs Expense $2,805, and Net Income
The income statement of Gopitkumar Co. for the month of July shows net income of $2,631 based on Service Revenue $6,305, Salaries and Wages Expense $2,095, Supplies Expense $1,167, and Utilities Expense $412. In reviewing the statement, you discover the f
The income statement for Weeping Willow Golf Club for the month ending July 31 shows Service Revenue $17,132, Salaries and Wages Expense $8,120, Maintenance and Repairs Expense $2,103, and Net Income $6,909. Prepare the entries to close the revenue and ex
The income statement for Weeping Willow Golf Club for the month ending July 31 shows Service Revenue of $16,058, Salaries and Wages Expense of $3,663, Maintenance and Repairs Expense of $3,034, and Net Income of $4,361. Prepare the entries to close the re
The income statement of Biscan Co. for the month of July shows net income of $1,500 based on Service Revenue $5,500; Salaries and Wages Expense $2,100; Supplies Expense $900; and Utilities Expense $500. In reviewing the statement, you discover the followi
Which of the following activities is not a component of the operating cycle? a. Sale of merchandise b. Payment of employees' salaries c. Collection of cash from merchandise sales d. Purchase of merchandise
Exercise #1 Compute division of net income with a salary allowance and fixed ratios. MPC Co. reports net income of $45,000. Partner salary allowances are Mark $15,000, Paul $5,000, and Chris $5,000. I
The income statement of Annette Co. for the month of July shows net income of $3,200 based on Service Revenue $7,700, Salaries and Wages Expense $2,600, Supplies Expense $1,400, and Utilities Expense
The revenue principle says: a. Measure revenues and expenses in order to compute net income. b. Divide time into annual periods to measure revenue properly. c. Record revenue only after you have earned it. d. Record revenue after you receive cash.
The condensed income statement for the Consumer Products Division of Milner Industries Inc. is as follows: Sales = $7,000,000 Cost of goods sold = $4,500,000 Gross profit = $2,500,000 Administrative expenses = $750,000 Income from operations = $1,750,000
Circular Flow Model Definition & Calculation
The circular flow model of economics shows how money moves through an economy in a constant loop from producers to consumers and back again.
%253Amax_bytes(150000)%253Astrip_icc()%252Fabstract-blue-yellow-wave--isolated-on-black-background-1017686290-a33fbadf6ecd4a25885b2219d5df5a0a.jpg)
ECONOMICS MACROECONOMICS
Circular Flow Model
By THE INVESTOPEDIA TEAM Updated July 31, 2022
Reviewed by ERIC ESTEVEZ
Fact checked by JARED ECKER
What Is the Circular Flow Model?
The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money.
That is the basic form of the model, but actual money flows are more complicated. Economists have added in more factors to better depict complex modern economies. These factors are the components of a nation's gross domestic product (GDP) or national income. For that reason, the model is also referred to as the circular flow of income model.
KEY TAKEAWAYS
The circular flow model demonstrates how money moves from producers to households and back again in an endless loop.
In an economy, money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.
The models can be made more complex to include additions to the money supply, like exports, and leakages from the money supply, like imports.
When all of these factors are totaled, the result is a nation's gross domestic product (GDP) or the national income.
Analyzing the circular flow model and its current impact on GDP can help governments and central banks adjust monetary and fiscal policy to improve an economy.
0 seconds of 0 secondsVolume 75%
1:27
Watch Now: How Does the Circular Flow Model Work?
Understanding the Circular Flow Model
The basic purpose of the circular flow model is to understand how money moves within an economy. It breaks the economy down into two primary players: households and corporations. It separates the markets that these participants operate in as markets for goods and services and the markets for the factors of production.
The circular flow model starts with the household sector that engages in consumption spending (C) and the business sector that produces the goods.
Two more sectors are also included in the circular flow of income: the government sector and the foreign trade sector. The government injects money into the circle through government spending (G) on programs such as Social Security and the National Park Service. Money also flows into the circle through exports (X), which bring in cash from foreign buyers.
In addition, businesses that invest (I) money to purchase capital stocks contribute to the flow of money into the economy.
Outflows of Cash
Just as money is injected into the economy, money is withdrawn or leaked through various means as well. Taxes (T) imposed by the government reduce the flow of income. Money paid to foreign companies for imports (M) also constitutes a leakage. Savings (S) by businesses that otherwise would have been put to use are a decrease in the circular flow of an economy’s income.
A government calculates its gross national income by tracking all of these injections into the circular flow of income and the withdrawals from it.
Adding Up the Factors
The circular flow of income for a nation is said to be balanced when withdrawals equal injections. That is:
The level of injections is the sum of government spending (G), exports (X), and investments (I).
The level of leakage or withdrawals is the sum of taxation (T), imports (M), and savings (S).
When G + X + I is greater than T + M + S, the level of national income (GDP) will increase. When the total leakage is greater than the total injected into the circular flow, national income will decrease.
Calculating Gross Domestic Product (GDP)
GDP is calculated as consumer spending plus government spending plus business investment plus the sum of exports minus imports. It is represented as GDP = C + G + I + (X – M).
If businesses decided to produce less, it would lead to a reduction in household spending and cause a decrease in GDP. Or, if households decided to spend less, it would lead to a reduction in business production, also causing a decrease in GDP.
GDP is often an indicator of the financial health of an economy. A common, though not official, definition of a recession is two consecutive quarters of declining GDP.
1
When this happens, governments and central banks adjust fiscal and monetary policy to boost growth.
Keynesian economics, for example, believes that spending leads to economic growth, so a central bank might cut interest rates, making money cheaper, so that individuals will buy more goods, such as houses and cars, increasing overall spending. As consumer spending increases, companies increase output and hire more workers to meet the increase in demand. The increase in employed people means more wages and, therefore, more people spending in the economy, leading producers to increase output again, continuing the cycle.
SPONSORED
A Digital Wallet for All Your Web3 Needs
From crypto to NFTs and beyond, accessing a wealth of DeFi platforms is simpler than you might think. With OKX, a leading digital asset financial service provider, you can access world-class security as you trade and store assets. You can also connect existing wallets and win up to $10,000 when you complete a deposit of more than $50 through a crypto purchase or top-up within 30 days of registration. Learn more and sign up today.
Guys, does anyone know the answer?