In a Simple Circular-Flow Diagram,why Is Total Income Equal to Total

question 143

Multiple Choice

In a simple circular-flow diagram,why is total income equal to total expenditure?

• A)because firms re-invest their revenue
• B)because savings are small
• C)because income from interest is not part of GDP
• D)because every transaction has a buyer and a seller

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Definitions:

Net Seller

An entity or individual that sells more of a security, commodity, or currency than they buy over a specified period.

Endowment

Refers to the total resources available to an individual or institution, including talents, wealth, and assets.

Normal Goods

Goods for which demand increases when consumer income rises, and decreases when consumer income falls, showing a direct relationship between income and demand.

Full Income

The total earnings, including all sources of income and gains, not just wages from employment.