In the Circular Flow of Income, the Allocation of Resources

question 48

Multiple Choice

In the circular flow of income, the allocation of resources is largely decided by

• A)central authorities and firms only.
• B)individuals only.
• C)central authorities only.
• D)firms and households acting independently.
• E)political parties and firms only.

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Definitions:

Opportunity Costs

Represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Accounting System

A systematic process of recording, summarizing, and analyzing financial transactions of a business to provide accurate financial information.

Tactical Decisions

Short-term decisions made within the framework of a company's strategic plans, often involving the allocation of resources or adjustment of operations.

Sunk Costs

Costs that have already been incurred and cannot be recovered or altered by future actions or decisions.