In the Circular Flow Model with the Government Sector,taxes

question 68

Multiple Choice

In the circular flow model with the government sector,taxes

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

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Definitions:

Risk-Free Interest Rate

The return on an investment that is guaranteed, with no risk of financial loss, typically associated with the most secure government bonds.

Strike Price

The specified price at which the buyer of an option can buy (call) or sell (put) the underlying security or commodity.

Put Options

Options contracts that give holders the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise Price

The predetermined price at which the holder of an option can buy (for a call option) or sell (for a put option) the underlying asset.