In a Simple Circular-Flow Diagram,firms

question 7

Multiple Choice

In a simple circular-flow diagram,firms

• A)purchase resources from households.
• B)purchase the output produced by households.
• C)receive income by selling resources to households.
• D)All of the above are correct.

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Definitions:

Fixed Asset Account

An account on the balance sheet representing long-term tangible assets held for business use and not expected to be converted to cash in the near term.

Accumulated Depreciation Account

A balance sheet item representing the cumulative amount of depreciation expense charged against an asset over its useful life.

Book Value

Refers to the net value of an asset as recorded on the balance sheet, calculated as the original cost minus accumulated depreciation and impairment.

Accrued Salaries

Salaries that have been earned by employees but have not yet been paid by the company.