Internal Revenue Service United States Department of the Treasury
Theme 4: What Is Taxed and WhyLesson 2: Taxes in a Market Economy

 

Activity 1: Circular Flow of Economy
Illustration of the circular flow of money, labor, and goods and services between households, business, and the government.


In the United States market economy, there are three sectors, or elements, that interact: households, businesses, and the government. Economists use the circular flow model to explain the interactions among these three sectors. Each sector of the economy contributes to the others.

Study the circular flow model. Answer the multiple-choice questions below by clicking on the correct answer. To assess your answers, click the Check My Answers button at the bottom of the page.

  1. Businesses provide the government with
  • A.
  • B.
  • C.
  1. Businesses receive _____ and ____ from the government.
  • A.
  • B.
  • C.
  1. Households provide businesses with
  • A.
  • B.
  • C.
  1. Businesses provide households with
  • A.
  • B.
  • C.

 

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