One of the key concepts involved in the circular flow diagram is that
A) households and businesses are in conflict with each other.
B) the national economy is similar to a zero-sum game.
C) one person's spending is another person's income.
D) the sum of the resource and product markets must equal household income.

Question

Quizplus · Accepted Answer

The circular flow diagram demonstrates that one person's spending on goods and services becomes another person's (or business's) income. This cycle continues as that person or business then spends money on other goods and services from other individuals or businesses, leading to a continuous flow of income and expenditure within the economy. It highlights the interdependence between households and businesses and the importance of consumer spending in driving economic activity. The other choices are not accurate descriptions of the key concept involved in the circular flow diagram.

One of the Key Concepts Involved in the Circular Flow