The circular flow: how households, businesses and government connect

Grade 12 Social Studies Worksheet

Circle the best answer.

1. Read this first

   Use this

   Card A. Compare chart "U.S. GDP and its four parts, billions of dollars" (U.S. Bureau of Economic Analysis, through FRED, retrieved Nov 14, 2026), columns Part | 2019 | 2024: Consumption (household spending) | 14,437.5 | 19,822.5; Investment | 3,893.7 | 5,306.1; Government purchases | 3,786.0 | 5,133.9; Net exports (exports minus imports) | −577.3 | −881.5; GDP | 21,540.0 | 29,381.0. Note: current dollars, not adjusted for prices. Consumption, investment and government purchases count all spending by those groups, including on goods made abroad. Net exports subtracts imports and adds exports.

2. 1.

   Ren compares the shares of GDP on card A for 2019 and 2024. Which claim does the card support best?

   • Consumption was about two-thirds of GDP in both years, while GDP rose about 36 percent
   • Consumption grew faster than the other parts, so households drive the economy
   • The economy produced about 36 percent more goods and services in 2024 than it did in 2019
   • Net exports were negative in both years
3. 2.

   A student claims net exports of −881.5 in 2024 mean the U.S. lost $881.5 billion to trade. Tala tests it with card A. What is the verdict?

   • Not supported: net exports are exports minus imports, and bought imports are counted in the other parts
   • Supported: GDP is $881.5 billion lower than it would be without imports
   • Not supported: the card gives the figure for 2019 and 2024 but not for the years in between, so no claim holds
   • Supported: the negative sign means exports fell by $881.5 billion in 2024
4. 3.

   Zee compares how the three spending parts grew from 2019 to 2024 on card A. Which statement is correct?

   • Government purchases grew far more than the rest, since their share is the smallest
   • Consumption grew least, because its share stayed near two-thirds of GDP
   • Each of the three grew about 35 to 38 percent, close to GDP's 36, so their shares barely moved
   • Investment grew fastest, because its dollar rise of 1,412 is bigger than the government's rise of 1,348
5. 4.

   A writer says the economy produced 36 percent more in 2024 than in 2019. Ari tests it with card A. What is the verdict?

   • Supported: each part of GDP rose by about 36 percent, so output must have risen that much in each part too
   • Not supported: GDP counts spending by households alone, not businesses
   • Not supported: card A is in current dollars, so part of the 36 percent is higher prices, not output
   • Supported: GDP rose from 21,540.0 to 29,381.0, which is 36 percent

6. Use this

   Card A. Compare chart "Economy 1: new spending passing round the circle" (made up for practice), columns Round | New spending ($): 1 | 100.00; 2 | 80.00; 3 | 64.00; 4 | 51.20. Note: made up for practice. In Economy 1 households spend 80 cents of each extra dollar of income and leak 20 cents to saving. The first four rounds total 295.20. Card B, "Economy 2" (made up). Households spend 60 cents of each extra dollar of income and leak 40 cents. The first four rounds of $100 of new spending are 100.00, 60.00, 36.00 and 21.60, which total 217.60. Card C, "The spending multiplier" (in our words). The total change in income equals the first round of new spending divided by the share of each extra dollar that leaks out of the circle. Card D, "A tax cut" (made up). A tax cut of $100 gives households $100 more income. In Economy 1 they spend 80 cents of each extra dollar.

7. 5.

   Bo uses cards A to C. What happens to the total change in income in each economy after many rounds?

   • Economy 1 approaches $100, since later rounds are smaller than the first
   • Economy 1 totals $295.20 and Economy 2 totals $217.60, the amounts after four rounds
   • Economy 2 approaches the larger total, because its larger leak sends more money out to be saved
   • Economy 1 approaches $500 and Economy 2 about $250: the bigger the leak, the smaller the total
8. 6.

   The government buys $50 of goods in Economy 1. Esme applies card C. What is the total change in income?

   • $250, which is the first round of $50 divided by the 0.20 leak
   • $62.50, which is $50 divided by the 0.80 that households spend
   • $40, which is $50 times the 0.80 that households spend
   • $50, because the government's purchase is the sole new spending in the economy
9. 7.

   A columnist says a $100 tax cut raises income as much as $100 of government purchases in Economy 1. Jun tests it with card D. What is the verdict?

   • Not supported: the cut raises $500, but the purchases raise just $400
   • Not supported: tax cuts raise nothing, because households save the whole cut they receive each year
   • Not supported: the cut starts with $80 of spending and totals $400, against $500 for purchases
   • Supported: both are $100 of new money, so both raise income by $500
10. 8.

    Kira compares Economy 1 and Economy 2 on cards A and B. Which claim do the rounds support best?

    • Economy 2's first four rounds total 217.60, less than 295.20
    • Economy 2's households are worse off, since their total is smaller
    • Economy 2 has a smaller total because its households chose to save more of each extra dollar
    • A larger leak each round makes later rounds shrink faster, so the same start totals less

11. Use this

    Card A. Compare chart "U.S. GDP in current and in 2017 dollars, billions" (U.S. Bureau of Economic Analysis, through FRED, retrieved Nov 14, 2026), columns Year | GDP in current dollars | GDP in 2017 dollars: 2019 | 21,540.0 | 20,715.7; 2020 | 21,375.3 | 20,284.5; 2021 | 23,745.8 | 21,556.0; 2022 | 26,059.7 | 22,079.7; 2023 | 27,825.9 | 22,724.1; 2024 | 29,381.0 | 23,394.9. Note: GDP in 2017 dollars values each year's output at the prices of 2017, the base year, so it changes only when output changes.

12. 9.

    Noah reads 2021 and 2022 on card A. Which statement about growth in 2022 is best supported?

    • GDP rose about 10 percent in current dollars but output rose only about 2.4 percent
    • Output grew 2,314 billion dollars, the rise in the first column
    • Prices fell in 2022, since output in 2017 dollars grew more slowly
    • The economy grew 9.7 percent in 2022, since GDP in current dollars rose by that much
13. 10.

    A writer says GDP in 2017 dollars shows how fast prices rose from 2019 to 2024. Pia tests it with card A. What is the verdict?

    • Supported: 2017 is the base year, so the column measures how much prices have changed since then in each year
    • Supported: the 2017-dollar column grew 13 percent, which is how much prices rose
    • Not supported: the card has no column for 2017, so it cannot be used
    • Not supported: the 2017-dollar column measures output at fixed prices; prices show in the gap between columns