The value of total output and total income in the simple circular flow model
A) are measures of the economy's level of savings.
B) include only intermediate goods.
C) are equal to each other.
D) are related in the sense that national income is less than national product.

Question

Quizplus · Accepted Answer

In the simple circular flow model, all income earned by households is spent on goods and services produced by firms, which in turn generates income for the firms. This creates a circular flow of income and output. Therefore, the value of total output and total income in the model is equal to each other.

The Value of Total Output and Total Income in the Simple