Which Idea Does the Circular Flow Model Illustrate

question 21

Multiple Choice

Which idea does the circular flow model illustrate?

• A) Every expenditure someone makes in an economy is exactly equal to another individual's income.
• B) Only two markets exist in every economy-input and output.
• C) Income is lower when there is more spending on services compared to goods.
• D) The flow of two things in the economy-production and money-travel in the same direction.

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Definitions:

Planning Budget

A financial forecast or projection, detailing expected revenues and expenses within a future period.

Net Operating Income

The profit a company generates from its regular business operations, excluding expenses and revenues from non-operating activities.

Client-visits

The act of meeting with clients or potential clients, often for the purposes of discussing business opportunities, providing services, or strengthening relationships.

Activity Variance

The difference between the budgeted and actual amount of an activity, such as hours worked or units produced, affecting budget and cost planning.