The Simple Circular Flow Model Shows That

question 33

Multiple Choice

The simple circular flow model shows that:

• A)households are on the demand side of both product and factor markets.
• B)businesses are on the supply side of both product and factor markets.
• C)households are on the supply side of the factor market and on the demand side of the product market.
• D)businesses are on the demand side of the product market and on the supply side of the factor market.

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Definitions:

Inflationary Expectations

Anticipations of future inflation that can influence economic behaviors in the present.

Default Risk Premium

The additional amount a borrower must pay to compensate the lender for assuming the risk that the borrower may default on the loan.

Corporate Bond

A debt security issued by a corporation to investors, typically offering interest payments and principal repayment at maturity.

Yield Curve

A graph showing the relationship between bond yields and maturities, commonly used to gauge future interest rate changes.