Which of the Following Is True of the Circular Flow

question 53

Multiple Choice

Which of the following is true of the circular flow model?

• A)It differentiates natural resources from the other factors of production.
• B)It suggests that to keep up with the economy, the population must grow.
• C)It treats economic growth as both the solution to all social ills and also as boundless.
• D)It argues that the economy cannot grow indefinitely.

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Definitions:

Price Index

A price index measures the average change over time in the prices paid by consumers for a market basket of consumer goods and services.

Replacement Cost

The cost to replace an item or asset at current prices, disregarding its original purchase price or accumulated depreciation.

Operating Margin

A profitability measure calculated as operating income divided by revenue, showing the percentage of profits generated from operations before taxes and interest.

Variable Costing

An accounting method that only includes variable production costs (costs that change with the level of output) in the cost of goods sold and treats fixed costs as period costs.