The Circular-Flow Diagram Shows the Flow of _____ and the Flow

question 273

Multiple Choice

The circular-flow diagram shows the flow of _____ and the flow of _____.

• A)goods and services; factors
• B)households; firms
• C)money; goods and services
• D)factors; money

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Definitions:

Status Quo Bias

The tendency most people have when making choices to select any option that is presented as the default (status quo) option. Explainable by prospect theory and loss aversion.

Anchoring

A cognitive bias in decision-making where individuals rely too heavily on an initial piece of information (the "anchor") when making judgments.

Minimum Payments

The smallest amount of a debt that must be paid each period, often used in the context of credit card debt or loans to avoid penalties.

Endowment Effect

A cognitive bias where people ascribe more value to things merely because they own them.