The national income accounting system measures economic activity based on the concept of the

Question

Quizplus · Accepted Answer

The circular flow of output and income through different sectors of the economy is the basis of the national income accounting system. This system measures the total value of goods and services produced in an economy, which is known as gross domestic product (GDP), and tracks the flow of income generated from production to households and businesses. The circular flow of income shows how firms receive revenue from the sale of goods and services, which is then distributed to workers in the form of wages, profits to owners, and taxes to the government. In turn, households use this income to purchase goods and services from firms, which sets the process in motion again.

The National Income Accounting System Measures Economic Activity Based on the Concept