Dr. Amanda S. King
ECON 2105
Answer Key for Practice Problems for Circular Flow Diagram and PPF
1. revenue ($2000) spending ($2000)
a)
catering services catering services
This process starts at spending and goods & services
b) revenues ($30,000) spending ($30,000)
200 jackets 200 jackets
I would start this process at revenues and the product side, although it would
be ok to start with spending and goods & services. Since the scenario states that
NorthFace sells the jackets to the US Olympic team it seems more reasonable to start on
the left side of the top section of the circular flow diagram.
c)
(Jenny) (Jenny as worker)
Inputs in prodn land, labor,K
Wages, rent, profits ($30,000) income ($30,000)
You could start this process either at Jenny supplying labor and receiving income
or at GSU getting an input into production and paying wages in return.
Market for
Goods &
Services
Market for
factors of
production
Market for
Goods &
Services
