# "Economics Basics: Circular-Flow Diagram Explained

Chapter 2, Problem 1

(choose chapter or problem)

QUESTION:

Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of goods and services and the flow of dollars for each of the following activities.

a. Selena pays a storekeeper $1 for a quart of milk b. Stuart earns$4.50 per hour working at a fastfood restaurant

c. Shanna spends $30 to get a haircut d. Sally earns$10,000 from her 10 percent ownership of Acme Industrial

### Questions & Answers

QUESTION:

Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of goods and services and the flow of dollars for each of the following activities.

a. Selena pays a storekeeper $1 for a quart of milk b. Stuart earns$4.50 per hour working at a fastfood restaurant

c. Shanna spends $30 to get a haircut d. Sally earns$10,000 from her 10 percent ownership of Acme Industrial

ANSWER:

Step 1 of 5

The circular flow model depicts the movement of money in the economy. The model shows how one group earns, and another group spends like the producer pays the wages and the household earns the wages. Again, the household pays for goods and services,  and the producer earns revenue. Thus, it shows the exchange of product market and factor market.

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##### "Economics Basics: Circular-Flow Diagram Explained

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Explore the fundamental concept of the circular-flow diagram in economics, which simplifies the intricate interactions between households and firms. Includes examples illustrating how money, labor, and services flow between these economic actors.

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