In the Circular Flow, How Are the "Value of Production

question 48

Multiple Choice

In the circular flow, how are the "value of production", "income", and "expenditures" related?

• A) They have no relationship to each other.
• B) Expenditures on GDP equal the value of production which equals income.
• C) Once tax payments are subtracted at each stage, they are equal.
• D) Once net exports of goods and services are subtracted from GDP, all three are equal.
• E) Value of production always equals income but expenditures are smaller because households save some of their income and do not spend it.

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