CIRCULAR FLOW MODEL Flashcards
1
Q
In the factor market, what do households and firms do
A
Households receive income in the form of wages, interest, dividends which firms use in the production process to create G%S
2
Q
In the product market, what do households and firms do
A
In the product market households spend their income in exchange for goods and services produced by firms sector
3
Q
What are savings and investments in the circular flow model and
A
Savings is the porpotion of income not spent on consumption and is leakage from the flow of current income. Investment is an injection of funds into the circular flow model
4
Q
A
