Which of the Following Is True Regarding the Circular Flow

question 241

Multiple Choice

Which of the following is true regarding the circular flow diagram?
I. ʺAggregate incomeʺ is the flow of income earned by firms.
II. Retained earnings are considered income earned by firms rather than part of householdsʹ income.
III. The government, households, and firms all have transactions in the goods market.

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

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Definitions:

Operating Revenues

The income earned from a company's primary business activities, excluding one-time or unusual expenses or incomes.

Variable Operating Costs

Expenses that vary in direct proportion to the level of production or sales volume.

Fixed Operating Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.