Question 2
National IncomeThe interdependence between households and business enterprises illustrated in the figure above is known as
- A.market interaction
- B.cash flow
- C.circular flow of income
- D.supply and demand for goods and services
- E.household preference schedule
Show the answer and explanation
Answer: C (circular flow of income)
Explanation
Households sell labour to firms for wages and spend the wages on firms' goods, so money and goods flow round in a circle: the circular flow of income.