Macroeconomics CH. 2
In the circular flow model, the market economy creates ______.
continuous flows of goods and services, resources, and money
Which of the following are true of the partnership form of business organization?
Partners pool financial resources and business skills. Partners share profits and losses.
The three main categories into which businesses fall are:
partnership corporation sole proprietorship
Which type of business structure is considered an independent legal entity?
corporation
The function of firms in the circular flow model is to ______ resources and ______ products.
purchase; sell
In the circular flow model, households ______ resources and ______ products.
sell; buy
Households and businesses are
sellers in the resource and product markets respectively.
sole proprietorship
unincorporated firm owned and operated by one person
flow 1 of the diagram represents
wage, rent, interest, and profit income
the two basic markets shown by the simple circular flow model are
produce and resource
in terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _______ market
produce; resource
According to the circular flow model, households buy goods and services that businesses make available in the _________ market.
product
In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____market.
product; resource
In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.
product; resource
the top of the diagram represents
resources and goods
Refer to the diagram. Arrows (1) and (3) are associated with
the resource market
corporation
A legal entity that is separate and distinct from the people who own it
True or false: The resource market is the place where resources or the services of households are produced.
False
Which of the following are found in the product market?
Goods Services
Which of the following occur in the resource market?
Households provide economic resources directly as workers or entrepreneurs. Households sell resources and businesses buy them. Businesses buy resources from households because they are necessary for producing goods and services.
In which of the following markets do households buy the goods and services that businesses make available?
Product market
The product market is the place where _______.
businesses sell goods and services and households buy goods and services
According to the circular flow model, ______ will buy resources from and sell products to households.
firms
In the circular flow model, households sell resources to, and buy products from _______.
firms
Which of the following are components of the circular flow model?
households businesses product market resource market
In the circular flow model ______.
households spend their income in the product market
Which of the following functions can a corporation do on its own behalf?
Acquire resources Sue others Incur debts Own assets
Which of the following best illustrates the circular flow model in action?
All of these answers illustrate the workings of the circular flow model.
partnership
An unincorporated firm owned and operated by at least two people
