Q1;Draw a circular-flow diagram.

Identify the parts of the model that correspond to the

flow of goods and services and the flow of dollars for each of the following activities.

a. Selena pays a storekeeper $1 for a quart of milk.

b. Stuart earns $4.50 per hour working at a fast-food restaurant.
c. Shanna spends $30 to get a haircut.
d. Sally earns $10,000 from her 10 percent ownership of Acme Industrial.

Step-by-step solution
Step 1 of 5
a) Flow of Good & service:-
Flow of Good in the form of milk takes place from Firm to Miss Selena; shown as red
color arrows.
Flow of Dollar:-
Flow of dollar takes place from Miss. Selena to Firm; shown as green color arrow.
Step 2 of 5
b) Flow of service:-
Mr. Stewart is a household providing labor (factor of production) to the fast food
restaurant (firm). Therefore, there will be a flow of service from Stewart to firm. This is
shown in the below diagram as red color arrows.
Flow of Dollar:-
Mr. Stewart is earning income and the firm is paying in the form of wages. Flow of dollar
as factor payments takes place from Firm to Mr. Stewart. This is shown as green color
arrows.

Step 3 of 5
c) Flow of service:-
Miss. Shanna is receiving service from the firm in the form of hair cut. Therefore, a flow
of service from firm takes place and it is represented as red color arrows.
Flow of Dollars:-
Miss. Shanna pays for the haircut. Therefore, dollars flows from Miss Shanna to the
firm. This is shown as green color arrow in the below diagram.
Step 4 of 5

Step 5 of 5
d) Flow of service:
Sally provided necessary factor of production in the form of capital. Therefore, the flow
of service is from household Miss .Sally to the firm. Moreover, it is shown as red color
arrow in the below figure.
Flow of Dollar:-
Firm pays Miss. Sally for her services in the form of returns (factor payments).
Therefore, dollar flows from Firm to Miss. Sally. This is shown as green color arrow in
the below diagram.