According to the circular flow,total output produced and total income
A)should differ by the value of intermediate goods.
B)should be increased by the unanticipated rate of inflation.
C)will always be increasing in a capitalist economy.
D)will be equal.

Question

Quizplus · Accepted Answer

In the circular flow, total output produced by firms ultimately becomes total income for households. Thus, total output and total income will be equal. The value of intermediate goods is already accounted for in the final output, so A is incorrect. Unanticipated inflation can lead to changes in output and income, but it is not a guaranteed increase and B is incorrect. While total output and income may generally increase over time in a capitalist economy, this is not a guarantee and C is incorrect.

According to the Circular Flow,total Output Produced and Total Income