Which diagram illustrates the flow of income earned and expenditures made by different sectors within the economy?

Multiple choice question for The National Economy. Select an option, then review the explanation below.

Explanation

Option A refers to a general income and spending diagram. Option B represents the aggregate demand and supply model. Option C correctly identifies the circular flow diagram, which depicts the movement of income and payments among economic sectors. Option D is unrelated, showing income against prices.

Practice related questions from the same subject.

1.How does leakage through imports in an open economy affect the multiplier's magnitude?
2.Which components determine the overall multiplier effect in an economy?
3.With fixed government expenditure and tax rates, during which economic phases does the government budget deficit increase and during which does it decrease?
4.What is the likely effect on economic output if the government raises taxes to fully cover an increase in its spending?
5.When households attempt to increase their savings, but equilibrium income shifts without any change in total savings, what economic concept does this illustrate?

Which diagram illustrates the flow of income earned and expenditures made by different sectors within the economy?

Explanation

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