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

   • Supported: GDP is $881.5 billion lower than it would be without imports
   • Not supported: net exports are exports minus imports, and bought imports are counted in the other parts
   • 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.

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

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

5. 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.

6. 4.

   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 approaches $500 and Economy 2 about $250: the bigger the leak, the smaller the total
   • Economy 2 approaches the larger total, because its larger leak sends more money out to be saved
   • Economy 1 totals $295.20 and Economy 2 totals $217.60, the amounts after four rounds
7. 5.

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

   • $50, because the government's purchase is the sole new spending in the economy
   • $62.50, which is $50 divided by the 0.80 that households spend
   • $250, which is the first round of $50 divided by the 0.20 leak
   • $40, which is $50 times the 0.80 that households spend
8. 6.

   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: tax cuts raise nothing, because households save the whole cut they receive each year
   • Not supported: the cut raises $500, but the purchases raise just $400
   • 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

9. 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.

10. 7.

    Luz compares card A's two columns for 2019 and 2024. Which statement about output and prices is best supported?

    • Output grew about 13 percent; the rest of the 36 percent rise is higher prices
    • Output grew about 21 percent, the rise in the gap between the two columns
    • Prices rose 13 percent, since output in 2017 dollars rose by that amount
    • Output grew about 36 percent, since GDP in current dollars rose from 21,540.0 to 29,381.0
11. 8.

    Milo compares the 2020 row with the 2019 row. Which claim do both columns support best?

    • Output fell less than 1 percent, since GDP in current dollars fell by that much
    • Output fell about 2 percent in 2020, while current-dollar GDP fell under 1 percent as prices rose
    • Prices caused the fall in output, because current-dollar GDP fell by less
    • Output fell about 2 percent in each part of the economy in 2020, as the columns show part by part
12. 9.

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

    • Output grew 2,314 billion dollars, the rise in the first column
    • Prices fell in 2022, since output in 2017 dollars grew more slowly
    • GDP rose about 10 percent in current dollars but output rose only about 2.4 percent
    • 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?

    • 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
    • Supported: the 2017-dollar column grew 13 percent, which is how much prices rose
    • Supported: 2017 is the base year, so the column measures how much prices have changed since then in each year