In the Circular Flow Model with the Government Sector, Taxes

question 30

Multiple Choice

In the circular flow model with the government sector, taxes

• A)on households flow in the same direction as do the goods and services.
• B)flow in the opposite direction as do transfers.
• C)flow from the goods market to the factor markets.
• D)on firms flow in the same direction as do factors of production.
• E)flow in the same direction as do transfers.

---

Definitions:

Supply and Demand

The fundamental economic model that describes how the price and availability of goods and services are determined in a market.

Artificial Price

A price level influenced by external factors such as government intervention, rather than by free market forces.

Imposed Price

A price that is set by an external authority rather than being determined by market forces.

Equilibrium Price

The price at which the quantity of a good supplied is equal to the quantity demanded, resulting in market stability.