Which of the Following Best Characterizes the Circular Flow of Income

question 37

Multiple Choice

Which of the following best characterizes the circular flow of income?

• A) Businesses buy resources from the government, and households buy goods and services from businesses.
• B) Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
• C) The government purchases resources from businesses and households and then sells goods and services to businesses and households.
• D) Households buy factors of production from businesses, and businesses buy goods and services from households.

Distinguish between assets, liabilities, equity, revenues, and expenses.

Comprehend the sequence and preparation of financial statements.

Calculate net income or net loss correctly.

Recognize the significance and placement of withdrawals and expenses in financial reporting.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.