The figure given below represents the circular flow of income between households,firms,financial intermediaries,and foreign countries. Figure 4.2
-Refer to Figure 4.2.What is the total savings of the household sector?
A)$35,000
B)$25,000
C)$17,500
D)$42,500
E)$45,000

Question

The figure given below represents the circular flow of income between households,firms,financial intermediaries,and foreign countries. Figure 4.2  
-Refer to Figure 4.2.What is the total savings of the household sector?
A)$35,000 
B)$25,000 
C)$17,500 
D)$42,500 
E)$45,000

Quizplus · Accepted Answer

The circular flow of income diagram shows that the household sector's savings flow to the financial intermediaries, which in turn lend the funds to the firms for investment. The total savings of the household sector is the sum of all the savings flows leaving the household sector, which is $17,500 in this case (as indicated by the arrow labeled "Savings" leaving the household sector and entering the financial intermediaries sector). Therefore, the best choice is C, $17,500.

The Figure Given Below Represents the Circular Flow of Income