Which of the following is TRUE in the case of the simple circular flow model with no saving?
A) Total spending is greater than total income.
B) Total spending equals total income only at full employment.
C) Total spending equals total income.
D) Total spending is less than total income.

Question

Quizplus · Accepted Answer

In the simple circular flow model with no saving, total spending by households equals total income received by firms, and vice versa. This is because all income earned by households is spent on goods and services produced by firms, and all spending by households ultimately results in income earned by firms through the sale of those goods and services. Therefore, total spending equals total income in this model.

Which of the Following Is TRUE in the Case of the Simple