Question

Firms produce the goods and services used by households. That includes everything from packaged food to video games to dry cleaning. Households provide the factors for production that firms require. These factors include the workers who make, distribute, and sell goods and services. Factors of production also include the revenue that firms earn from consumer expenditures. That money comes from the income paid by firms, primarily in the form of wages. This flow of funds from firms to households back to firms creates an exchange that benefits both firms and households. When an economy is strong, jobs are created and livable wages are paid. This allows workers to spend more money, and the cycle continues.

–“The Circular Flow of Income”

How does economic growth stimulate employment opportunities?

As an economy grows, businesses may open up new offices overseas.
As an economy grows, firms expand, and more workers are needed as a result.
Economic growth leads to withdrawals in an economy, which helps create more jobs.
Economic growth prevents injections, which can stop businesses from hiring workers.

Answer 1

Correct answer: As an economy grows, firms expand, and more workers are needed as a result.

Explanation: Economic growth raises demand for goods and services, so firms increase production and investment, which requires hiring more workers. The higher incomes from employment also fuel further demand (the multiplier). The other choices are incorrect: opening offices overseas can shift jobs abroad rather than create domestic jobs; "withdrawals" (savings, taxes, imports) reduce spending and tend to lower demand, not create jobs; and growth does not prevent injections—injecting spending (investment, government purchases, exports) is what helps generate jobs.