Households Are Vital to the Circular Flow Model in Which

question 4

Multiple Choice

Households are vital to the circular flow model in which two ways?

• A) They supply factors of production and purchase goods and services.
• B) They export and import goods and services.
• C) They vote for political officers and pay taxes.
• D) They facilitate exchange between consumers and firms and supply funds.

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Definitions:

Trade Credit

Credit granted in the normal course of business between companies. That is, vendors don’t usually demand immediate payment for their products.

Unsecured Creditors

Lenders or creditors who have extended loans without any collateral. If the borrower defaults, these creditors have no claim to any assets of the borrower.

Short-Term Funds

Short-Term Funds are investment vehicles that invest in securities with short maturity periods, usually less than one year, providing liquidity and income.

Trade Credit

A type of commercial financing in which a buyer is allowed to purchase goods or services and pay the supplier at a later scheduled date.