According to the circular flow model, expenditures by one person translate: a) directly into his or...
According to the circular flow model, expenditures by one person translate: a) directly into his or her income. b) indirectly into the household's budget. c) indirectly into the value of that person's time. d) directly into income for someone else
Homework Answers
Option D.
- In the circular flow model of an economy the households and firms are the active participants and they exchange raw materials and finished products with each other respectively.
- The households supply raw materials to the firm's while the firms pay the households for the raw materials.
- Similarly the firm's sell finished products to the households in the exchange of money.
- Hence, any expenditure made by one individual translates directly into income for someone else due to the circular nature of the model.
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