In the circular flow model with the government sector, transfers
A) flow only through the goods market.
B) flow in the same direction as do taxes.
C) flow in the opposite direction as do taxes.
D) to firms flow in the same direction as do rent, wages, interest, and profits.
E) to households flow in the same direction as do expenditures on goods and services.
C
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Consider a market for used cars. Suppose there are only two kinds of cars: lemons and good cars. A lemon is worth $1,500 both to its current owner and to anyone who buys it. A good car is worth $6,000 to its current and potential owners
Buyers can't tell whether a car is a lemon until after they have bought the car. What do economists call the problem that buyers of used cars face? What kind of cars (lemons, good cars, or both) are traded? Explain and substantiate your answer.
In Figure 3-5 above, the marginal propensity to save is
A) 0.20. B) 0.80. C) 0.05. D) 0.02.