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Suppose a new business opens in a community, hiring local workers and producing ...

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Suppose a new business opens in a community, hiring local workers and producing goods. How does this affect the circular flow of income?

The government steps in to redistribute the new income.

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Households stop providing labour to existing firms.

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Household income increases, leading to more spending and higher business revenues.

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Firms reduce production because the circular flow is disrupted.

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