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ECS1601 REVISED WHOLE COURSE
ECS1601 TEST BANK
Question 1
In the goods market of the circular flow model, ….
1) firms buy factors of production from consumers
2) firms buy finished products from households
3) consumers buy factors of production from firms
4) firms sell factors of production to the government
5) consumers buy finished products from firms The correct alternative is
[5]. Explanation
In the goods market of the circular flow model, consumers receive income in
the form of salaries and wages, interest, rent and profit and use this income to
purchase finished consumer goods and services.
Question 2
In the factor market, … .
1) a student buys lunch at a local university cafeteria.
2) the South African Defence Force buys machine guns from a
weapons manufacturer
3) a retirement fund buys shares in a major company
4) a farmer buys farmland from a retiring farmer The correct alternative is [4].
5) a welder buys a personal computer from an electronics store
Explanation
A factor market is a market where factors of production such as labour, land
and capital are traded. Therefore, in this case only the sale of land (i.e.
farmland) will occur in a factor market.
Question 3
In the circular flow of income and spending, … .
1) investment results in a decrease in the volume of the income flow
2) taxes result in an increase in the volume of the income flow
3) imports result in an increase in the volume of the income flow
4) savings result in a decrease in the volume of the income flow The
correct alternative is [4].
Explanation
