What Are the Four Sectors in a More Complex Circular-Flow

question 123

Multiple Choice

What are the four sectors in a more complex circular-flow diagram?

• A) households, government, financial markets, and international trade
• B) households, firms, government, and financial markets
• C) households, firms, financial markets, and international trade
• D) households, firms, government, and international trade

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Definitions:

Non-diversifiable Risks

Risks that affect all investments across the market and cannot be mitigated through diversification.

Financial Markets

Marketplaces where individuals and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand.

Market Risk Premium

The added financial return that an investor predicts when opting for a market portfolio with inherent risk over guaranteed risk-free assets.

Expected Return

The weighted average of all possible returns from an investment, with the weights being the probabilities of each outcome.