1. Economic models The following diagram presents a circular-flow model of a simple economy. The outer…
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Question “1. Economic models The following diagram presents a circular-flow model of a simple economy. The outer…”
1. Economic models The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the Inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Markets for Goods and Services Firms Households Markets for Factors of Production Which of the following is true regarding this economic model? While simple, the circular-flow diagram can still be useful for the purposes of modeling how dollars and resources move throughout an economy. Because it does not take into account the role of government, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy. Because, in reality, the economy is very large, the simplicity of the circular-flow diagram makes it useless for the purposes of modeling how dollars and resources move throughout an economy. Because it does not take into account international trade, the circular-flow diagram is useless for the purposes of modeling how dollar and resources move throughout an economy.
Answer
The purpose of Mol an economy is when o the Circular flow diagram can still serve the purpose of modeling how dollars and other resources are distributed throughout an economy. When households purchase or send these factors of Production, they earn income. Firms earn revenue when they buy goods or services. hou
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