In the circular-flow diagram,
A)taxes flow from households to firms,and transfer payments flow from firms to households.
B)income payments flow from firms to households,and sales revenue flows from households to firms.
C)resources flow from firms to households,and goods and services flow from households to firms.
D)inputs and outputs flow in the same direction as the flow of dollars,from firms to households.

Question

Quizplus · Accepted Answer

In the circular-flow diagram, firms provide income payments to households in exchange for the resources (inputs) they provide. On the other hand, households purchase goods and services from firms, generating sales revenue for the firms. Therefore, income payments flow from firms to households, and sales revenue flows from households to firms. Taxes and transfer payments do not flow in this direction. Resources do flow from households to firms, but goods and services flow from firms to households, not the other way around. The flow of inputs and outputs does not necessarily have to align with the flow of dollars.

In the Circular-Flow Diagram