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Understanding Micronia's Economy: A Circular-Flow Diagram Guide
Chapter 0, Problem 1(choose chapter or problem)
At right is a simplified circular-flow diagram for the economy of Micronia.
a. What is the value of GDP in Micronia?
b. What is the value of net exports?
c. What is the value of disposable income?
d. Does the total flow of money out of households the sum of taxes paid and consumer spending equal the total flow of money into households?
e. How does the government of Micronia finance its purchases of goods and services?
Questions & Answers
QUESTION:
At right is a simplified circular-flow diagram for the economy of Micronia.
a. What is the value of GDP in Micronia?
b. What is the value of net exports?
c. What is the value of disposable income?
d. Does the total flow of money out of households the sum of taxes paid and consumer spending equal the total flow of money into households?
e. How does the government of Micronia finance its purchases of goods and services?
ANSWER:Step 1 of 6
The circular flow of income shows a market economy's movement of commodities and money between households, enterprises, and the government. It demonstrates the exchanges between economic agents and the distribution of income and products throughout the economy.