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1. The circular flow model
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Based on this model, households earn income whenpurchasein resource markets. Suppose Juanita earns $575 per week working as a doctor for the Medical Clinic. She uses $8 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Gilberto $300 per week to work the cash register. Gilberto uses $225 to purchase medical services from the Medical Clinic. Identify whether each of the following events in this scenario occurs in the resource market or the product market.
Gilberto spends $225 to purchase medical services from the Medical Clinic.
Gilberto earns $300 per week working for Pillmart Pharmacy.
Juanita spends $8 to buy a box of aspirin.
Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply.
The aspirin Juanita receives The $225 Gilberto spends to purchase medical services from the Medical Clinic The $300 per week Gilberto earns working for Pillmart Pharmacy Juanita's labor
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