Which of the following is consistent with the circular flow of income?
I. Goods and services flow in one direction.
II. Payments and incomes flow in one direction.
III. Sellers receive less than what buyers spend.
A) I only
B) II only
C) III only
D) Both I and II

Question

Which of the following is consistent with the circular flow of income? 
I. Goods and services flow in one direction.
II. Payments and incomes flow in one direction.
III. Sellers receive less than what buyers spend.
A) I only
B) II only
C) III only
D) Both I and II

Quizplus · Accepted Answer

Option I is consistent with the circular flow of income because goods and services flow from firms to households and the government, and money flows from households and the government to firms for the purchase of these goods and services. 
Option II is also consistent with the circular flow of income because payments from households and the government for goods and services provide incomes for firms and households respectively. 
Option III is not consistent with the circular flow of income because sellers receive the same amount as what buyers spend (in a closed economy without imports/exports), making it a two-way flow of money.

Which of the Following Is Consistent with the Circular Flow