The diagram that shows the income received and payments made by each sector of the economy is the
A) aggregate demand-aggregate supply diagram.
B) circular flow diagram.
C) income flow diagram.
D) income-production diagram.

Question

Quizplus · Accepted Answer

The circular flow diagram shows the flow of income and payments among households, firms, and government in an economy. It illustrates how each sector of the economy receives income from other sectors and makes payments to other sectors. The other options do not accurately describe this diagram. The aggregate demand-aggregate supply diagram shows the relationship between the price level and the quantity of goods and services. The income flow diagram and income-production diagram are not commonly used diagrams in economics.

The Diagram That Shows the Income Received and Payments Made