The circular-flow diagram illustrates that:
A)production generates income so that income and production are the same.
B)the economy's income is less than its production.
C)the economy's income is exceeds its production.
D)none of the above are necessarily correct.

Question

Quizplus · Accepted Answer

The circular-flow diagram shows that production generates income (in the form of wages, rent, interest, and profits) which in turn is used to purchase goods and services. This cycle continues endlessly and implies that income and production are interrelated. Therefore, option A is the correct choice. Option B and C are incorrect as they suggest that either income is less than the production or exceeds it which is incorrect based on the circular-flow diagram. Option D is incorrect as option A is necessarily correct.

The Circular-Flow Diagram Illustrates That