Question

Suppose Dina earns $675 per week working as a jewelry appraiser for Classy's Jewelry Store. She uses $8 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Charles $200 per week to work the cash register. Charles uses $375 to purchase a necklace from Classy's Jewelry Store.

Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.

Event	Market for Factors of Production	Market for Goods and Services
Dina earns $675 per week working for Classy's Jewelry Store.
Charles spends $375 to purchase a necklace from Classy's Jewelry Store.
Dina 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 $375 Charles spends to purchase a necklace from Classy's Jewelry Store

The aspirin Dina receives

Dina's labor

True or False: For the economy as a whole, expenditures must equal income.

True

False

Answer 1

Event 1

Dina earns $675 per week working for Classy's Jewelery Store.

Dina is earning factor income (wages).

Factor income is earned in the market for factors of production.

So,

This event occurs in the market for factors of production.

Event 2

Charles spends $375 to purchase a necklace from Classy's Jewelery Store.

Charles is purchasing a good (necklace).

Goods are purchased in the market for goods and services.

So,

This event occurs in the market for goods and services.

Event 3

Dina spends $8 to buy a box of aspirin.

Dina is purchasing a good (aspirin).

Good are purchased in the market for goods and services.

So,

This event occurs in the market for goods and services.

Following events represent the flow from a firm to a household -

1. The aspirin Dina received.

In an economy, expenditure by one becomes the income of the other.

So,

In an economy as a whole, expenditures must equal income.

Thus,

The given statement is True.