Which of the following is illustrated by the circular flow of income?
A)the flows of expenditures and income in a household
B)that firms own the factors of production
C)the interaction of individuals and firms through the factors and goods markets
D)that the flow of payments moves in the same direction as the flow of goods
E)that there is no relationship between goods markets and factor markets

Question

Quizplus · Accepted Answer

The circular flow of income illustrates the interaction between individuals and firms through the factors and goods markets. It shows how factors of production move from households to firms in exchange for income, and how firms produce and sell goods and services to households. The flow of income and payments moves in opposite directions, with payments for goods and services flowing from households to firms, and income payments flowing from firms to households.

Which of the Following Is Illustrated by the Circular Flow