The Circular Flow Diagram Is Best Described as A(n)

question 193

Multiple Choice

The circular flow diagram is best described as a(n)

• A)abstraction of little value in macroeconomics.
• B)exact representation of the cause and effect relationship between spending and employment.
• C)model that clarifies the relationship between spending and income.
• D)model to explain the relationship between the federal deficit and tax revenues.

---

Definitions:

T Account

A skeleton version of a standard account, used for demonstration purposes.

Debit Side

The left side of an account in double-entry bookkeeping, used to record increases in assets and expenses or decreases in liabilities and equity.

Credit Side

The right side of an accounting ledger where credits are recorded, typically increasing liabilities and equity or decreasing assets.

Expenses

The money spent or costs incurred in an entity's efforts to generate revenue, representing the cost of doing business.