In the circular-flow diagram,
A)factors of production flow from government to firms.
B)goods and services flow from households to firms.
C)income paid to the factors of production flows from firms to households.
D)spending on goods and services flows from firms to households.

Question

Quizplus · Accepted Answer

The circular-flow diagram shows the flow of goods, services, and income in an economy. In this diagram, factors of production (land, labor, capital, and entrepreneurship) flow from households to firms, and goods and services flow from firms to households. In return, income paid to the factors of production flows from firms to households. Therefore, choice C is the best answer as it correctly describes the flow of income in the circular-flow diagram.

In the Circular-Flow Diagram