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Is the following statement about circular flow true or false?Business produce goods and...

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Mizdee | Student, Undergraduate | Valedictorian

Posted September 16, 2012 at 12:29 AM via web

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Is the following statement about circular flow true or false?

Business produce goods and services and sell them to households and governments.  The market where this interaction takes place is called the goods market.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 16, 2012 at 12:48 AM (Answer #1)

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This statement is not true unless your textbook or instructor uses different terminology than I am aware of.  This market should be called the product market.  I have, however, also seen it called the "goods and services market."

This question refers to the circular flow model that shows how all parts of an economy are linked together.  In one part of the model, businesses sell to households.  In the other part of the model, households sell factors of production to businesses.  The market in which businesses sell goods and services to households (and governments) is typically called the product market.  It can also be called the goods and services market.  I have not seen it called the "goods market."  However, the terminology is very similar so this may simply be a case in which different textbooks use different terms.

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