According to the Simple Circular Flow Diagram, Total Income Equals

question 203

Essay

According to the simple circular flow diagram, total income equals total expenditures. Suppose $100 in funds flows through an economy. Suppose $75 of the business resource costs goes to labor and $25 goes to non-labor resources. Why is spending not $75?

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Definitions:

Selling Expenses

Costs incurred directly and indirectly in making sales, including advertising, commissions, and shipping expenses.

Operating Expenses

Ongoing costs for running a business that do not include the cost of goods sold but can cover expenses such as rent, utilities, and salaries.

Accounts Payable

Accounts payable is the amount a company owes to its suppliers or creditors for goods or services received but not yet paid for.