Question: In the diagram, the outer arrows represent the payments that are counted in the current account, whereas the inner arrows represent the payments that are counted in the financial account. Place the payments along the appropriate arrow.
What is represented by the arrow from the firms to the factor markets?
In factor markets, households and firms play different roles than they do in the markets for goods and services. Households provide labor, capital, and other factors of production to firms, and this is represented by the direction of the arrows on the “Labor, capital, land, etc.” lines on the diagram above.
Which arrow represents the flow of income?
counterclockwise arrows
The counterclockwise arrows represent the flow of money. The clockwise arrows represent the flow of goods and services. In a closed economy, such as the example to the left, all the spending of households and firms must equal the income received by the factors and goods-and-services markets.
What are the four participants in the economy?
The flows of production, income and expenditure are influenced by four participants: households (consumers), firms (business enterprises), government (public sector) and the foreign sector. In economics a household is any number of people that live together and make joint economic decisions.
Which arrow represents the flow of income payments?
The circular flow model is a diagram illustrating the flow of spending and income in an economy. The counterclockwise arrows represent the flow of money.
How is the circular flow model used in economics?
One of the main basic models taught in economics is the circular-flow model, which describes the flow of money and products throughout the economy in a very simplified way. The model represents all of the actors in an economy as either households or firms (companies), and it divides markets into two categories: Markets for goods and services
What are the four sectors of circular flow of income?
The four sectors are as follows: household, firm, government, and foreign. The arrows denote the flow of income through the units in the economy. This circular flow of income model also shows injections and leakages.
Who are the actors in the circular flow model?
Within this model, all economic actors are placed into one of two categories: households or companies (firms).
Why are the outer lines on a circular flow diagram closed?
The outer lines on the diagram (the lines labeled “Labor, capital, land, etc.” and “Finished product”) also form a closed loop, and this loop represents the fact that firms use factors of production to create finished products and households consume finished products in order to maintain their ability to provide factors of production.
