The circular-flow model demonstrates that the value of total production is equal to the value of total income in an economy.

Question

Quizplus · Accepted Answer

The circular-flow model illustrates that households supply factors of production, such as labor, land, and capital, to firms in exchange for income, while firms supply goods and services to households in exchange for revenue. This means that the total income earned in an economy is equal to the total output produced by firms, making option A true.

The Circular-Flow Model Demonstrates That the Value of Total Production