The Circular Flow Model Illustrates

question 207

Multiple Choice

The circular flow model illustrates

• A)the importance of having a central plan for the economy.
• B)how capital and other resources are created.
• C)how money is created by the banking system.
• D)the interdependence of businesses and consumers.

---

Definitions:

Fixed Costs

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

Revenue

The total amount of money received by a company for goods sold or services provided during a certain time period.

Break-even Units

The number of units a company must sell to cover all its costs, with no profit or loss.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials or labor directly involved in producing a product.