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JAMB Economics 2005 Question 2

Question 2

National Income

In the circular flow diagram above, the arrow marked K indicates

Diagram for this question
  1. A.the flow of capital goods
  2. B.payments to factors of production
  3. C.payments for goods and services
  4. D.the flow of economic rent
Show the answer and explanation

Answer: C (payments for goods and services)

Explanation

Use the diagram. Goods and services flow from firms to households, and K is the money flowing the other way, from households to firms, to pay for them.