In the Circular-Flow Diagram, Which Flows Are Involved

question 81

Multiple Choice

In the circular-flow diagram, which flows are involved?

• A) Income from factors of production flows from firms to households.
• B) Goods and services flow from households to firms.
• C) Factors of production flow from firms to households.
• D) Spending on goods and services flow from firms to households.

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Definitions:

Owner's Capital

The amount of equity a business owner has in the firm, representing the owner's personal investment plus any profits retained in the business.

Internal Control

Practices and procedures deployed by a company to verify the honesty of its financial and accounting figures, enhance responsibility, and eliminate swindling.

Inventoriable Costs

Direct costs associated with the acquisition or production of goods that are held for sale in the ordinary course of business.

Closing Entries

Closing entries are journaled at the end of an accounting period to transfer the balances in temporary accounts to permanent accounts, thereby resetting the temporary accounts for the next period.