According to the circular flow model, expenditures by one person translate:
A) directly into income for someone else.
B) indirectly into the value of that person's time.
C) directly into his or her income.
D) indirectly into the household's budget.

Question

Quizplus · Accepted Answer

The circular flow model shows that expenditures by one person become income for someone else in the economy. This is a direct flow of money as the money spent on goods and services by households becomes income for the firms producing those goods and services. This income received by firms enables them to pay wages to their employees and purchase inputs for production. This cycle continues in a circular flow of income and spending in the economy.

According to the Circular Flow Model, Expenditures by One Person