Which of the Following Best Characterizes the Circular Flow of Income

question 133

Multiple Choice

Which of the following best characterizes the circular flow of income?

• A) Households buy goods and services from businesses, and businesses sell goods and services to households.
• B) The government purchases resources from businesses and households and then sells goods and services to businesses and households.
• C) Businesses buy resources from the government, and households buy goods and services from businesses.
• D) Businesses buy resources from households, and households use their income to buy goods and services from businesses.

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Definitions:

Administrative Processing

Procedures and activities related to the management and execution of office tasks and functions.

NPV Method

A capital budgeting technique that calculates the difference between the present value of cash inflows and outflows over a period of time to assess the profitability of an investment.

Reinvested

Refers to the practice of using profits or dividends earned from an investment to purchase additional shares or units, thus compounding the investment's growth.

Cost of Capital

The minimum rate of return a company must earn on its investments to maintain its market value and attract funds.