Which One of the Following Is an Example of the Circular

question 103

Multiple Choice

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

• A) Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms.
• B) The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets.
• C) Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms.
• D) The firms in the factor markets pay to households in the form of wages, interest, rent and profit ⎯ for resources demanded.

---

Definitions:

Straight-Line Method

An accounting method of depreciation where an equal amount of an asset's cost is allocated as an expense each year over its useful life.

Salvage Value

The estimated value at sale of an asset following its period of utility.

Book Value

The net value of an asset as recorded on the balance sheet, calculated as the original cost minus accumulated depreciation or amortization.

Salaries Payable

An account that represents the amounts owed to employees for work performed that has not yet been paid.