What Does the Simple Circular-Flow Diagram Illustrate

question 102

Multiple Choice

What does the simple circular-flow diagram illustrate?

• A)that expenditure generates income so that income and the value of production are equal
• B)that the economy's income exceeds its expenditure
• C)that the expenditure of an economy exceeds its income
• D)that money "flows" from households to firms and not the other way around

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Definitions:

Societal Issue

A problem that affects a significant portion of society and is often debated or requires intervention.

Companies

Entities engaged in commercial, industrial, or professional activities, aiming to earn profits by offering goods or services.

Economic Factors

Elements outside the business that affect its performance, including inflation, unemployment, economic growth, and exchange rates.

Foreign Currency Fluctuations

Variations in the value of one currency compared to another, which can impact international trade and investments.