In a Circular-Flow Diagram, Spending on Goods and Services Flows

question 3

True/False

In a circular-flow diagram, spending on goods and services flows from households to firms and income flows from firms to households.

---

Definitions:

Equivalent Unit

A measure used in cost accounting to express the amount of work done on partially completed goods in terms of fully completed units.

Factory Overhead

Indirect manufacturing costs that are not tied directly to specific units of product, such as maintenance, utilities, and rent of a factory.

Direct Labor

Direct labor refers to the wages paid to workers who are directly involved in the production of goods or services, such as assembly line workers.

Direct Materials

Raw materials that can be directly attributed to the production of goods, evident in the final product.