The Circular Flow Model

question 136

Multiple Choice

The circular flow model

• A)measures identical flows through the different markets
• B)shows how firms maximize profits and minimize costs
• C)shows how competitive markets interact with noncompetitive markets
• D)measures the value of income earned by the public sector
• E)measures the value added by the business sector as it uses funds

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Definitions:

Wages

Compensation or remuneration paid by an employer to an employee in exchange for work or services rendered.

19th Century

The period from January 1, 1801, through December 31, 1900, marked by industrial, cultural, and political changes worldwide.

Inflation

The economic condition characterized by an increase in prices and fall in the purchasing value of money.

Real Wages

Wages adjusted for inflation, representing the purchasing power of income earned from work.