The circular flow diagram illustrates the expenditures made by

Question

Quizplus · Accepted Answer

The circular flow diagram shows the flow of goods and services and money among households, firms, governments, and the rest of the world. It depicts how households receive income from firms and spend it on goods and services produced by firms. Firms receive revenue from households and use it to pay for inputs to produce goods and services. Governments receive taxes from households and firms and use it to provide public goods and services. The rest of the world trades goods and services with households and firms, and the transactions are mediated through markets for goods and services and international trade. Therefore, choice A is the best choice as it represents all the four major economic players and their expenditure flows.

The Circular Flow Diagram Illustrates the Expenditures Made by