In a Simple Circular-Flow Diagram, Why Is Total Income Equal

question 47

Multiple Choice

In a simple circular-flow diagram, why is total income equal to total expenditure?

• A) because firms re-invest their profits
• B) because savings are small
• C) because income from interest is not part of GDP
• D) because every transaction has a buyer and a seller

---

Definitions:

First Amendment

Part of the U.S. Constitution prohibiting Congress from making laws restricting the freedom of speech, religion, press, assembly, and petition.

U.S. Flag

Pertains to vessels or ships registered in the United States, indicating nationality and the jurisdiction under U.S. laws and regulations.

Police Powers

The authority granted to a state to regulate matters for the betterment of the health, safety, morals, and general welfare of its inhabitants.

Building Codes

Regulations that specify the standards for constructed objects such as buildings and nonbuilding structures to ensure safety and health standards are met.