What Does the Simple Circular-Flow Diagram Illustrate

question 118

Multiple Choice

What does the simple circular-flow diagram illustrate?

• A) that expenditure generates income so that income and the value of production are equal
• B) that the economy's income exceeds its expenditure
• C) that factors of production "flow" from firms to households
• D) that money "flows" from households to firms

---

Definitions:

Adjustment Heuristic

A decision-making process where an initial estimate is adjusted based on additional information or analysis.

Associative Play

A stage in child development where children play together, engaging in similar or complementary activities but without a set organization, rules, or goals.

Switching Members

Switching members involves changing the composition of a group or team by adding new members and/or removing existing ones, typically to improve performance or adapt to new challenges.

Nonprogrammed Decisions

Decisions that are made in response to unique, non-routine, and unpredictable situations.