The Figure Given Below Represents the Circular Flow of Income

question 53

Multiple Choice

The figure given below represents the circular flow of income between households, firms, financial intermediaries, and foreign countries.
Figure 4.2

-Refer to Figure 4.2. What is the total savings of the household sector?

• A) $35,000
• B) $25,000
• C) $17,500
• D) $42,500
• E) $45,000

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Definitions:

Absolute Advantage

The ability of an individual, company, or country to produce a good or service more efficiently than competitors, using fewer resources.

Opportunity Cost

A different way to describe it would be the cost of missing out on the benefits of the second-best option when a choice is made.

Production Possibilities Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs and technology, demonstrating the concept of opportunity cost.

Consumption Possibilities Frontier

A curve depicting the maximum combinations of goods and services a consumer can afford with a given budget, subject to prices.