Which of the Following Is True Regarding the Circular Flow

question 229

Multiple Choice

Which of the following is true regarding the circular flow diagram?
I. "Aggregate income" is the flow of income earned by firms.
II. Retained earnings are considered income earned by firms rather than part of households' incom
III. The government, households, and firms all operate in the financial market.

• A) I only
• B) I and III
• C) I and II
• D) III only

Know the principles guiding the recognition of revenue and expenses.

Comprehend the fundamental accounting equation and its components (Assets = Liabilities + Equity).

Recognize the nature and classification of assets, liabilities, and equity.

Calculate equity given assets and liabilities.

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Definitions:

Direct Labor

The labor costs directly associated with the production of goods, such as wages for assembly line workers.

Cash Receipts

Represents the money received by a company from its operational activities, usually documented during the accounting period when they are received.

Cash Disbursements

The process of paying out money from a business or organization, typically for expenses or obligations.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including both materials and labor costs.