The Circular-Flow Diagram Is Important Because It Shows That the Flow

question 115

Multiple Choice

The circular-flow diagram is important because it shows that the flow of money into each market or sector of the economy is _____ the flow of money coming out of that sector.

• A) greater than
• B) equal to
• C) less than
• D) unrelated to

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Definitions:

Moral Hazard

A situation where one party engages in risky behavior knowing that it is protected against the consequences, often due to asymmetric information.

Recklessly

Acting with a lack of concern for the risk or negative consequences of one's actions.

Airbags

Safety devices in vehicles designed to inflate rapidly in the event of a collision to prevent or reduce injury to passengers by limiting direct impact.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another, leading to potential advantages or disadvantages in the transaction.