The Circular Flow Model Shows the Flow of

question 54

Multiple Choice

The circular flow model shows the flow of

• A) only funds in stock and bond markets.
• B) only money throughout the economy.
• C) expenditure and income throughout the economy.
• D) only tax payments and government expenditures.
• E) goods markets and factor markets as they move through the economy.

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Definitions:

Mixed Cost

A cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption, becoming variable with further production or consumption.

Fixed Expenses

Regular expenses that do not vary in total over a wide range of activity levels.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted; indicates the contribution towards covering fixed expenses and generating profit.

Net Income

The income a company retains after deducting all costs, taxes, and expenses from its total revenue.