Use the following to answer questions :
Figure: Circular-Flow Model 
-(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in government spending, which of the following is likely to happen?
Definitions:
Variable Costs
Costs that change in proportion to the level of production or business activity, such as raw materials and direct labor.
Fixed Costs
Expenses that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance premiums.
Transfer Price
The price at which divisions of a company transact with each other for goods or services.
Valve Division
A specialized business unit within a company that focuses on the production and sales of valve products.
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