Because of the circular flows of expenditure and income in the economy, total ________ equals total ________ equals total ________.
A) investment; income; consumption
B) expenditure; income; value of production
C) expenditure; investment; income
D) consumption; expenditure; value of production
E) consumption; investment; expenditure

Question

Quizplus · Accepted Answer

In an economy, the circular flow model illustrates that total expenditure by households (on goods and services) equals total income (earned from producing these goods and services), which in turn equals the total value of production. This reflects the interconnectedness of different sectors in an economy, where one's spending becomes another's income, and the total value of goods and services produced equals the total expenditure on them.

Because of the Circular Flows of Expenditure and Income in the Economy