In the simple circular flow model of the economy, total expenditures on goods and services equal total household income.

Question

Quizplus · Accepted Answer

In the simple circular flow model, households are the primary economic actors who receive income as a result of providing factors of production (such as labor) to businesses. This income is then spent on goods and services produced by those same businesses. Therefore, total expenditures on goods and services must equal total household income in this model.

In the Simple Circular Flow Model of the Economy, Total