The circular flow model shown in Figure 2.3 illustrates exchanges in two markets, the product market and the factor market. A) and households spend earnings from resource sales on goods and services in the factor market. a) hire resources sold by hoseholds in the facto market. SURVEY . Circular flow of income. Producers are considered the firms or suppliers in a circular flow model. The term circular flow of income or circular flow in economy refers to a simple economic model that has the reciprocal circulation of income between consumers and producers. Answer: A Topic: Circular Flow Skill: Recognition Question history: Previous edition, Chapter 4 AACSB: Reflective Thinking 25) The factor market can best be described as where A) households buy goods and services. Which best explains why competition is an important part of a free-market system? This covers the path of goods from producers to consumers and households, for the exchange of money. Thus income or money first flows production to the households in the form of factor payments & then from the households to the production in the form of consumption expenditure. Circular Flow is one of the major methodologies in economics that represents the overall fiscal transactions in a system. Which best explains how a free-market system has a circular flow of influences? The income continue to flow in a circular way so it is called circular flow of income. between economic agents. Let us build on the circular flow model by discussing more fully the concept of a market. between economic agents.The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction. Businesses, using the money spent by individuals while consuming and the money raised from selling products to pay for resources to run their businesses, purchased material to … Circular Flow Model DRAFT. 24) The circular flow model shows that consumer goods and services produced by business firms are sold in the A) goods market. Consumer decisions affect producers, and producer decisions affect consumers. The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. In the circular flow model, producers. Describe the circular flow model of the free-market system. Whe C) hire resources sold by households in the factor market. The following points highlight the eight main advantages of the circular flow of money in an economy. a. households make deposits into savings accounts. President Obama, Mark Warner, Al Gore. Q. asked Jul 7, 2016 in Economics by OneMoreTime. Below you will find a 20 question flash review game covering the circular flow model. In today’s society, there is a seemingly non-stop transfer of currency on a daily basis. C) labor market. Tags: Question 2 . The circular flow of income and expenditure refers to the process whereby the national income and expenditure of an economy flow in a circular manner continuously through time. In a free-market system houses and businesses use the market to exchange currency and goods. The production possibilities frontier, or curve, is a graphical representation of the ______ . The advantages are: 1.Link between Producers and Consumers 2.Creates a Network of Markets 3.Inflationary and Deflationary Tendencies 4.Basis of the Multiplier 5.Importance of Monetary Policy 6.Importance of Fiscal Policy 7.Importance of Trade Policies 8. The Circular Flow Model The circular flow diagram The circular flow diagram shows how resources and products flow through the economy. 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