Chapter 4

Since the U.S. is organized as a market economy, the government sector does not play any role in economic activity.

False

The government sector sells sells resources to households and buys goods and services from firms.

False

Resources that flow through the circular flow model include all of the following except:

final goods

public sector

government

Private Sector

households business firms international sector

Surplus:

the government spend less than it collects in taxes in a single year. The extra tax revenue will go toward paying down the debt.

Deficit:

the government spends more than it collects in taxes in a single year. the money the government borrows is added to the debt

When the flow of money from the foreign countries to the domestic firms equals the flow of money from the home country to the foreign firms, _____.

the value of net exports is zero

FormulaforNetExports

total exports - total imports

what is an example of the circular flow model and shows the interdependence of households and firms?

Households supply their resources to the firms in the factor markets, in turn, demand in the product market the goods and services produced by the firms.

Federal Debt:

The total of all past budget deficits, minus what had been repaid with surpluses

Based on the circular flow model, goods and services flow from:

businesses to households in product markets.

In the circular flow model,

money flows from the households to the firms through the product market.