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In the Circular-Flow Diagram, One Loop Represents the Flow of Goods

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In the circular-flow diagram, one loop represents the flow of goods, services, and factors of production, and the other loop represents the corresponding flow of dollars.


Definitions:

Indirect Materials

Items that are used during the production process but do not become part of the final product, such as lubricants for machinery or cleaning supplies.

Bulk Purchase Items

Products bought in large quantities, typically at a discounted price, for the purpose of reselling or for use over an extended period.

Total Cost

The sum of all expenses incurred in the process of producing or offering a product or service, including direct and indirect costs.

Supplier Performance

Evaluation of a supplier's ability to meet quality, delivery, and cost expectations, impacting the buyer's operational success.

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