In the Circular Flow Model with the Government Sector, Taxes

question 59

Multiple Choice

In the circular flow model with the government sector, taxes

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

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Definitions:

Total Fixed Costs

Expenses that do not change with the level of production or sales over a certain time period, such as rent or salaries.

Variable Input

A factor of production, such as labor or raw materials, whose quantity can be changed easily by a business to adjust to the level of output.

Short Run

Short Run is a time period in economics during which at least one input is fixed while others are variable.

Fixed Input

A factor of production that cannot be easily increased or decreased in the short term, such as land or machinery.