In the Circular-Flow Diagram, the Value of Household Income-The Sum

question 125

Multiple Choice

In the circular-flow diagram, the value of household income-the sum of wages, dividends, interest, rental income, and transfer payments-equals the sum of:

• A)household tax payments.
• B)consumer spending, private saving, and household tax payments.
• C)the money supply.
• D)transfer payments and household tax payments.

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Definitions:

Utility

The satisfaction or benefit derived by consumers from consuming goods and services.

Opportunity Cost

The potential benefit that is missed out on when choosing one alternative over another.

Production Possibilities

Production possibilities refer to the different combinations of goods and services that an economy can produce given its available resources and technology, illustrated by the production possibilities frontier (PPF).

Consumer Goods

Products and services that are consumed by individuals or households to satisfy their immediate needs and wants.