The Figure Given Below Represents the Circular Flow of Income

question 48

Multiple Choice

The figure given below represents the circular flow of income between households, firms, financial intermediaries, and foreign countries. Figure 4.2 Refer to Figure 4.2.Assume investment spending decreases by $4, 000.Everything else being the same, what must be the new value of net trade flows in order to maintain total expenditures on business firms' output at $35, 000?

• A)-$2, 500
• B)-$1, 500
• C)$3, 500
• D)$6, 500
• E)$7, 500

Understand the effects of government intervention in monopolies through regulations such as price ceilings.

Differentiate between market structures based on the ability to price discriminate.

Comprehend the concept of economies of scale and its relation to natural monopolies.

Identify scenarios where monopolies generate deadweight loss and understand efficiency implications.

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Definitions:

Welfare State

A government system that provides social security, health care, and financial aid to its citizens.

Policy Group

involves a collective or body focused on the development, advocacy, or implementation of specific policies or guidelines within an organization or society.

Conservatives

People or political groups that generally advocate for preserving traditional values and institutions, emphasizing stability and continuity.

Legal-Rational Authority

Power legitimized through laws, rules, and procedures, characteristic of modern bureaucratic institutions.