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:

Closing Entries

A set of journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts.

Revenue Account

An account that tracks the income earned by a company, including sales revenue, services revenue, and interest income.

Adjusted Balances

Balances reported in financial statements that have been modified for any adjustments, like accruals or prepayments, to reflect true values.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income or loss.