The circular flow of income assumes that
A) profit is not a cost of production.
B) the national income accounting approach is not an adequate way to measure the economy's performance.
C) goods and services flow in one direction and money payments flow in the other.
D) total income is the sum of the value of intermediate goods and final goods and services.

Question

Quizplus · Accepted Answer

The circular flow of income assumes that goods and services flow in one direction and money payments flow in the other. This means that households spend money on goods and services produced by firms, while firms receive money payments from households for their goods and services. This cycle of money and goods flowing between households and firms is what creates the circular flow of income in the economy.

The Circular Flow of Income Assumes That