In the circular flow,how are the "value of production," "income," and "expenditures" related?
A)They have no relationship to each other.
B)Once tax payments are subtracted at each stage,they are equal.
C)Expenditures on GDP equals the value of production which equals income.
D)Once net exports of goods and services are subtracted from GDP,all three are equal.
E)Value of production always equals income,but expenditures is smaller because households save some of their income and do not spend it.

Question

Quizplus · Accepted Answer

In the circular flow, expenditures on GDP (consumption, investment, government spending, and net exports) equals the value of production, which equals income. This is because all expenditures on goods and services ultimately go to the households, which provide factors of production and receive income in return. This relationship forms a circular flow of income and expenditure in the economy.

In the Circular Flow,how Are the "Value of Production," "Income