Figure 6-2 Shows a Spending Flow Model Where Both Consumption

question 51

Multiple Choice

Figure 6-2 shows a spending flow model where both consumption and investment goods are being produced. Use the figure to answer questions .
Figure 6-2
-Refer to Figure 6-2. The purchase of a new tractor by Farmer Brown is:

• A) classified as gross private investment and the flow is represented by 5.
• B) classified as gross private investment and the flow is represented by 2.
• C) classified as consumption and the flow is represented by 5.
• D) classified as consumption and the flow is represented by 1.

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Definitions:

Liquidity

A measure of a company's or an individual's ability to meet short-term financial obligations; the ease with which assets can be converted into cash.

Marketability

The ease with which a product or service can be sold or marketed in a particular market.

Profitability

The ability of a company to generate earnings relative to its revenue, assets, or equity over a specific period, indicating its financial health.

Vertical Analysis

A financial method that expresses each item within a financial statement in percentage terms of a base figure for the same time period, facilitating comparison.