Which of the Following Best Characterizes the Circular Flow of Income

question 98

Multiple Choice

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

• A) Businesses buy resources from the government, and households buy goods and services from businesses.
• B) Businesses buy resources from households, and households use the money from the sale of resources to buy goods and services from businesses.
• C) Households buy factors of production from businesses, and businesses buy goods and services from households.
• D) The government purchases resources from businesses and households and then sells goods and services to businesses and households.

---

Definitions:

Machine-Hours

A measure of the time machines are run, used in allocating manufacturing overhead to products.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of a product or service.

Plantwide Predetermined Manufacturing Overhead Rate

A single overhead rate calculated for an entire manufacturing plant, applied to all jobs or products to allocate manufacturing overhead costs.

Machine-Hours

Machine-Hours indicate the total hours that machinery is operating during a specific period of time.