TOPIC 2: CIRCULAR FLOW ACTIVITY 1 MULTIPLE CHOICE Choose the correct answer by writing down the correct letter in your answer book. E.g. 1. E 1.1 The factors of production in a circular flow are owned by... a) Labour b) Business c) Households d) Foreign Subsidies are provided by ... to other participants. a) Labour b) Govemment c) Households d) Business The market for short-term loans and savings is known as ... market. a) Money b) Capital c) Factor d) Goods The market where goods and services are traded is known as ... a) Factor market b) Money market c) Product market d) Capital market An economy that has no foreign sector is known as

In a circular flow model, households play a pivotal role as they own the factors of production: land, labor, capital, and entrepreneurship. They provide these resources to businesses in exchange for income, which then fuels consumption and drives economic activity. Essentially, households are the backbone of economic flow, ensuring that resources are allocated efficiently in the market! Governments also have a significant impact on the circular flow by providing subsidies to businesses and households, injecting funds into the economy to stimulate growth. This financial support can encourage production, support innovation, and help lower prices for consumers. It's like the government is the cheerleader on the sidelines, giving a boost when needed to keep the economic game going strong!