The level of economic activity and the size of the circular flow would never change if:
A) there were no imports or exports.
B) government taxes equaled transfer payments to households.
C) the only spending in the economy were nonincome-determined spending.
D) the only spending in the economy were income-determined spending by households, and households spent all that they earned.

Question

Quizplus · Accepted Answer

The level of economic activity and the size of the circular flow would remain constant if the only spending in the economy were income-determined spending by households, and households spent all that they earned. This scenario implies there are no savings, investments, or external trade to alter the flow, leading to a stable economic cycle.

The Level of Economic Activity and the Size of the Circular