Question

The chart shows a circular flow model describing the movement of goods and services.

A circular flow model describes the movements of goods and services. Goods and services move from firms to households. Imports move from households to the foreign sector. Exports move from the foreign sector to firms. The factors of production influence the movement of imports and exports.
How does globalization cause the foreign sector to influence the economy?

The foreign sector influences how services move between firms and households.
The foreign sector influences how imports and exports move between firms and households.
The foreign sector influences how factors of production move between firms and households.
The foreign sector influences how goods move between firms and households.

Answer 1

The foreign sector influences how imports and exports move between firms and households.

Globalization increases trade, so foreign markets affect the flow of goods and services into (imports) and out of (exports) the domestic economy.