Question

Choose the correct answer for each row.

Determine which of the following examples align with the circular flow model of economics.

Select one correct answer in each row.

Aligned

NOT aligned

An individual purchases a rare antique from an auction house for personal use without intending to sell it. The auction house sells the antique, receiving revenue from the sale—the antique remains at the new owner's home for their own enjoyment.

Aligned Radio Button
NOT aligned Radio Button
The townspeople own the farmland and work at a nearby farm that sells its crops to the stores in town. The farm pays the townspeople rent for the use of the land and wages for working on the farm. The townspeople use the revenue to purchase goods from local stores.

Aligned Radio Button
NOT aligned Radio Button
A comic book store sells a rare comic to a collector. The comic is very expensive and highly valued by the collector. The collector takes the comic home, places it securely in a locked safe, and does not remove it for many years.

Aligned Radio Button
NOT aligned Radio Button
The government collects taxes from households and firms and provides public goods and services. The government's spending and taxation influence the circular flow by affecting the income and spending patterns of households and firms.

Aligned Radio Button
NOT aligned Radio Button
Mirabel works part-time at a local discount store. She recently opened a Roth IRA with an online brokerage. She buys stocks in some of her favorite companies and receives quarterly dividends.

Aligned Radio Button
NOT aligned Radio Button

Answer 1

An individual purchases a rare antique from an auction house for personal use without intending to sell it. The auction house sells the antique, receiving revenue from the sale—the antique remains at the new owner's home for their own enjoyment.
NOT aligned — sale of an existing (used) good is a transfer of ownership, not current production counted in the circular‑flow of income and output.

The townspeople own the farmland and work at a nearby farm that sells its crops to the stores in town. The farm pays the townspeople rent for the use of the land and wages for working on the farm. The townspeople use the revenue to purchase goods from local stores.
Aligned — classic circular‑flow: households supply factors (land, labor), receive income (rent, wages) and spend on firms’ goods.

A comic book store sells a rare comic to a collector. The comic is very expensive and highly valued by the collector. The collector takes the comic home, places it securely in a locked safe, and does not remove it for many years.
NOT aligned — like the antique, this is effectively a transfer/hoarding of an existing good rather than current production/output in the circular‑flow.

The government collects taxes from households and firms and provides public goods and services. The government's spending and taxation influence the circular flow by affecting the income and spending patterns of households and firms.
Aligned — government taxes and spending are a standard part of the circular‑flow model (government sector).

Mirabel works part-time at a local discount store. She recently opened a Roth IRA with an online brokerage. She buys stocks in some of her favorite companies and receives quarterly dividends.
Aligned — shows households receiving wages, saving/investing through financial markets and receiving dividend income, all included in the extended circular flow.