Circular Flow & Business Cycles is one of 9 topics in the Grade 12 Economics CAPS syllabus, covered across 3 lessons on Study Vault. Below are real practice questions from this topic with full worked answers.
Sample practice questions
Easy
1. In the simple two-sector circular flow model, households sell factors of production to firms in which market?
The factor market
The goods market
The foreign exchange market
The money market
Answer: The factor market — Households supply land, labour, capital and entrepreneurship to firms in the factor market, receiving factor income (rent, wages, interest, profit) in return.
Easy
2. Which of the following is classified as an injection into the circular flow?
Government spending
Savings
Taxation
Imports
Answer: Government spending — Injections add spending into the circular flow that does not originate from household consumption: investment (I), government spending (G), and exports (X) are the three injections.
Medium
3. What term describes a withdrawal of income from the circular flow that is not passed on as spending on domestic goods and services, such as savings, taxation, or imports?
Answer: A leakage — Savings, taxation and imports are all leakages: withdrawals of income from the circular flow that do not return as domestic spending in that round.
