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21) In the circular flow, ________ provide the factor services.

A) households

B) businesses

C) producers

D) businesses and households

22) The circular flow of income involves the idea that

A) in every economic exchange one party takes advantage of the other party.

B) the seller of a good receives less than the buyer spends.

C) the seller of a good receives more than the buyer spends.

D) the seller of a good receives exactly the same amount as the buyer spends.

23) The circular flow of income shows

A) the dollar value of output is less than the total income.

B) the dollar value of output is more than the total income because of the existence of profits.

C) the dollar value of output is exactly equal to the total income.

D) the dollar value of output is more or less than the total income, depending on whether profits are positive or negative.

24) The circular flow of income assumes that

A) profit is not a cost of production.

B) the national income accounting approach is not an adequate way to measure the economy's performance.

C) goods and services flow in one direction and money payments flow in the other.

D) total income is the sum of the value of intermediate goods and final goods and services.

25) In the circular flow model,

A) households demand goods and services which are supplied by firms, and the firms demand resources that are supplied by intermediate firms.

B) households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.

C) households buy goods and services and firms supply goods. Resources are supplied by other firms.

D) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from firms.

26) Goods and services are sold

A) in the product markets.

B) in the factor markets.

C) by households.

D) only as intermediate goods.

27) Resources can be purchased

A) in the product markets.

B) in the factor markets.

C) exclusively through the government.

D) at a grocery store.

28) Total income

A) is the yearly amount earned by owners of the nation's resources.

B) includes only wages received by workers.

C) includes only wages and interest payments.

D) excludes profits.

29) The amount earned by owners of the nation's factors of production is

A) the wages and fringe benefits received by the nation's workers.

B) all profits received by businesses.

C) total income.

D) private and government transfer payments.

30) Profits

A) are a cost of doing business because entrepreneurs would not incur the risk of starting a business if they didn't expect to earn profits.

B) are a cost of doing business because they are payments to others.

C) are not a cost of doing business because they are owed to resource owners.

D) are not a cost of doing business because they are often zero or negative.

 

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