In the circular flow diagram, the different payments made by firms to households include
A) wages and profits.
B) interest and taxes.
C) transfer payments and dividends.
D) taxes and transfer payments.

Question

Quizplus · Accepted Answer

Firms make payments to households in the form of wages and profits for their labor and entrepreneurial services. Interest and dividends are paid to individuals who own savings accounts and stocks, respectively, and are not directly related to the circular flow of income and expenditure. Transfer payments are made by the government, not firms, to individuals who are in need of financial assistance, and taxes are paid by households to the government.

In the Circular Flow Diagram, the Different Payments Made by Firms