Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

A)inputs used by businesses.
B)spending by households.
C)output bought by households.
D)earnings by businesses.

Question

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

A)inputs used by businesses. 
B)spending by households. 
C)output bought by households. 
D)earnings by businesses.

Quizplus · Accepted Answer

The arrow going from box 2 to box 1 represents the spending by households on the output produced by businesses. Therefore, the answer is C, which represents the output bought by households.

Refer to the Diagram of the Circular Flow of Income