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CA Foundation Determination of National Income — practice questions

Explore 45 free Determination of National Income questions in CA Foundation Business Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Determination of National Income questions and exercises with answers

Showing questions 1–30 of 45.

Which two sectors make up the basic two-sector circular flow model?Read the answer and worked solution →Which sector does the three-sector model add to the two-sector model?Read the answer and worked solution →The four-sector model extends the three-sector model by adding which sector?Read the answer and worked solution →In the circular flow of income, what does a leakage mean?Read the answer and worked solution →Which of the following is a leakage from the circular flow?Read the answer and worked solution →In the five-sector model, equilibrium occurs when total leakages are:Read the answer and worked solution →If S + T + M exceeds I + G + X, income and output will:Read the answer and worked solution →If S + T + M is less than I + G + X, the economy is likely to experience:Read the answer and worked solution →Who developed and visualized the circular flow in the Tableau économique?Read the answer and worked solution →Which economist described circular flow in his 1730 Essay on the Nature of Trade in General?Read the answer and worked solution →In Quesnay's model, which class consisted only of landowners?Read the answer and worked solution →Quesnay held that the real movers of the economy were:Read the answer and worked solution →In Marx's simple reproduction, what happens to economic growth?Read the answer and worked solution →How does expanded reproduction differ from simple reproduction?Read the answer and worked solution →Money and goods in the circular flow move in:Read the answer and worked solution →In the two-sector model, what do households do with their income?Read the answer and worked solution →In the three-sector model, flows from households and firms to the government take the form of:Read the answer and worked solution →What does the foreign sector in the four-sector model comprise?Read the answer and worked solution →What is the role of the financial sector in the five-sector model?Read the answer and worked solution →The injection that the financial sector provides to the firms sector is:Read the answer and worked solution →Which leakage does the government sector create in the circular flow?Read the answer and worked solution →What is the main leakage from the overseas sector?Read the answer and worked solution →Why are household savings treated as a leakage?Read the answer and worked solution →A farmer is paid by overseas buyers for exported wool. For the farmer's economy this is:Read the answer and worked solution →Wages paid by firms to households in the circular flow count as:Read the answer and worked solution →The circular flow analysis is the basis of which system of accounts?Read the answer and worked solution →Which economist, assisting Keynes, developed circular flow into the system now used by the UN and OECD?Read the answer and worked solution →The circular flow model shows that income earned from production equals what?Read the answer and worked solution →The unending nature of the circular flow means that economic activities in an economy:Read the answer and worked solution →Why can the circular flow not run forever on its own?Read the answer and worked solution →

Worked practice questions

Which two sectors make up the basic two-sector circular flow model?

  1. Firms and government
  2. Government and exporters
  3. Households and banks
  4. Households and firms
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Correct answer: D. Households and firms

The simplest model assumes only households supplying factors and firms producing goods, with no government, financial or foreign sector.

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Which sector does the three-sector model add to the two-sector model?

  1. Foreign sector
  2. Financial sector
  3. Agricultural sector
  4. Government sector
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Correct answer: D. Government sector

Taxes, subsidies, transfers and public purchases are brought in by adding government to households and firms.

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The four-sector model extends the three-sector model by adding which sector?

  1. Financial sector
  2. Government sector
  3. Foreign sector
  4. Service sector
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Correct answer: C. Foreign sector

Imports, exports and capital flows enter through the rest of the world, which is the fourth sector.

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