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What effect do consumer-protection regulations have on the circular flow of the free-market system?

  • Question 10b of 10 - Consumer protection regulations

  • Maximum Attempts: 1
  • Question Type: Multiple Choice
  • Maximum Score: 2
  • Question: What effect do consumer-protection regulations have on the circular flow of the free-market system?
  • Answers:
  1. They increase costs for producers, which slows the flow of investment.
  2. They divert resources to government planners, which cuts down on economic activity.
  3. They lead to increased prices and higher taxes, which reduces the flow to almost nothing.
  4. They inspire consumer confidence, which leads to increased purchases from producers.

The correct answer is: They inspire consumer confidence, which leads to increased purchases from producers. When consumers are protected, they feel secure and typically buy more goods and services.

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