The idea that total expenditures equal total income earned is illustrated in the
A) double-entry accounting system.
B) intermediate value-added system.
C) circular flow diagram.
D) personal and national income accounts diagram.
E) cost of living adjustment to the balance of payments.

Question

Quizplus · Accepted Answer

The circular flow diagram is a visual representation of the economy, showing how households and firms interact through markets for goods and services and for factors of production. In the circular flow diagram, total expenditures by households and firms in the markets for goods and services are equal to total income earned by households and firms in the markets for factors of production, illustrating the idea that total expenditures equal total income earned.

The Idea That Total Expenditures Equal Total Income Earned Is