In a Simple Circular-Flow Diagram, the Two Types of Markets

question 168

True/False

In a simple circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

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Definitions:

Gross Earnings

The total amount of income earned by an individual or entity before any deductions or taxes are applied.

Deductions

Amounts subtracted from gross income to reduce taxable income, including expenses, allowances, or certain types of losses.

Payroll Deductions

Amounts subtracted from an employee's gross pay for taxes, insurance, retirement contributions, and other mandatory or voluntary expenses.