Question
1. The economy's income and expenditure The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green)
1. The economy's income and expenditure
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
Based on this model, households earn income whenf irms purchase labor and capital in markets for factors of production.
Suppose Dina earns $800 per week working as a roofer for Chloe's Construction. She uses $8 to install reflective stickers on her bike at Riley's Off-Road Repair. Riley's Off-Road Repair pays Charles $425 per week to fix bicycles. Charles uses $225 to purchase roofing supplies from Chloe's Construction.
Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.
Event | Market for Factors of Production | Market for Goods and Services | |
---|---|---|---|
Dina spends $8 to install reflective stickers on her bike. | |||
Charles spends $225 to purchase roofing supplies from Chloe's Construction. | |||
Charles earns $425 per week working for Riley's Off-Road Repair. |
Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs.Check all that apply.
The reflective stickers Dina receives
The $225 Charles spends to purchase roofing supplies from Chloe's Construction
Dina's labor
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