The Circular Flow of Income Model Shows That Output, Income

question 1

True/False

The circular flow of income model shows that output, income and expenditure are equal to one another.

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Definitions:

Real Balances Effect

The impact on consumer purchasing power resulting from a change in the price level, affecting real income and consumption.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often used as a measure of inflation.

Consumption

The act of using goods and services for personal needs or desires, a basic economic activity measured to assess the health and growth of an economy.

Keynesian Economics

An economic theory stating that government intervention can stabilize the economy through fiscal and monetary policy.