Question

Four key markets and the circular flow of income
The circular-flow diagram is a visual model of the economy. The circular
flow of income is coordinated by four key markets.
1. The resource market coordinates businesses demanding resources and
households supplying them in exchange for income capital into balance with
the borrowing by businesses and governments. with sales (exports plus net
inflow of capital) to them government purchases, and net exports) with the
supply of domestically produced goods and.
2. The loanable funds market brings the net saving of households plus the net
inflow of foreign.
3. The foreign exchange market brings the purchases (imports) from foreigners into
balance.
4. The goods and services market coordinates the demand (consumption,
investment, services (real GDP). For each transaction in the following table,
identify which of the four key markets the transaction
Transaction Goods and Foreign Loanable Resource
Services Exchange Funds Market
Marke Market Market
A domestic car company purchases
a new welding machine from a local manufacturer.
The government spends more than it has in tax
revenue, running a budget deficit that is financed
with government bonds.
A local business borrows $100,000 from a bank.
A local business hires a consultant to retrain its employees.

Answer 1

Answer and Explanation:

As per the data given in the question,

1)

A domestic car company buys a new welding machine from a local manufacturer = Goods and service market

Goods and service market is that place where households purchase items and business person sell their products.This market includes stores, Internet, and other places where customer can exchange goods and services.

2)

Government pays more amount than it has it its tax revenue which indicates it's running budget deficit that is financed with government bonds = Foreign exchange market

Foreign exchange market is a platform where global decentralized trading of currencies takes place. This market defines foreign exchange rates for every currency.

3)

A local business takes $100,000 for temporary use form bank = Loanable fund market

loanable fund market determines the market interest rate. According to this, the interest rate is determined by demand and supply of loanable funds.

4)

A local business hires consultant to counsel its employee = Resource market

Resource market is a market in which the business person can go in the market to buy the resources in order to purchased the goods and services