Which of the following best illustrates the circular flow model in action?
A) Bobbie goes to work and builds cars,and uses the income she receives to buy food at the grocery store.
B) Evan buys a new couch;the owner of the furniture store uses some of the money from the sale to pay her supplier,and uses the rest to take her family out to dinner.
C) Boeing experiences a surge in orders for new airplanes,prompting the company to hire more workers.
D) All of these answers illustrate the workings of the circular flow model.

Question

Quizplus · Accepted Answer

All of the given scenarios illustrate different aspects of the circular flow model. In option A, Bobbie is a producer who uses her income to consume goods produced by others, thus completing the circular flow. In option B, the owner of the furniture store and her suppliers are also part of the circular flow. Option C illustrates how changes in the level of economic activity (increase in orders) can impact hiring decisions and, in turn, the incomes of workers.

Which of the Following Best Illustrates the Circular Flow Model