The Lower Portion of the Circular Flow Model Contains Factor

question 104

Multiple Choice

The lower portion of the circular flow model contains factor markets in which households provide:

• A) goods and services.
• B) savings, spending, and investment.
• C) natural resources, labor, and capital.
• D) output of all final goods and services produced.

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Definitions:

Cost Flow Assumption

An accounting principle that determines how costs are allocated to inventory and cost of goods sold, examples include FIFO, LIFO, and average cost methods.

Cost of Goods Sold

The immediate expenses related to the creation of products that a company sells.

Merchandise on Credit

Goods that have been sold but not yet paid for, implying that the buyer owes the seller money.

Gross Amount

The gross amount is the total figure before any deductions are made, such as expenses, taxes, or discounts.