📚 Part 1: Understanding the Components

1. Which of the following are the main components of the circular flow model?

Households

Businesses/Firms

Government

Financial sector

International sector

2. In the circular flow model, households provide _____________ to businesses and receive _____________ in return.

Money; goods and services

Factors of production; income

Taxes; government benefits

Savings; investments

3. What role does the government play in the circular flow?

Only collects taxes

Only provides services

Collects taxes and provides government spending

Has no role in the circular flow

4. The international sector includes:

Imports from other countries

Exports to other countries

Foreign investment

Local businesses only

✏️ Part 2: Applying Your Knowledge

5. Explain in your own words what the circular flow of income model shows about how an economy works.

6. Give a New Zealand example of how money flows from households to businesses, and then back to households.

7. What might happen to the circular flow if households decided to save much more money instead of spending it? Explain your reasoning.

🎨 Part 3: Create Your Own Model

8. In the space below, draw a simple circular flow diagram. Include and label: households, businesses, government, and show the flow of money and goods/services with arrows.

9. Choose one disruption that could affect New Zealand's circular flow (e.g., natural disaster, global pandemic, major policy change). Describe how this would impact the flow of money and resources in our economy.