In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income? A. Taxes on the production of goods and services are determined according to individual income. B. Domestic expenditures on imports generally equal foreign expenditures on U.S. exports. C. People tend to spend all of their income on goods and services. D. Every penny spent on a good or service must end up as someone's income.

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24-02-2020
Business

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In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income? A. Taxes on the production of goods and services are determined according to individual income. B. Domestic expenditures on imports generally equal foreign expenditures on U.S. exports. C. People tend to spend all of their income on goods and services. D. Every penny spent on a good or service must end up as someone's income.

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keziasynergy keziasynergy · Answer 1 · 2020-03-02T11:55:27+01:00

Option D

Every penny spent on a good or service must end up as someone's income so the total value of production in an economy equal the total value of income

Explanation:

The circular flow model describes how cash flows through society. Cash moves from yielders to workers as payments and runs back to yielders as cash for products. Since all the value created must refer to someone in the class of a request on the value, the national product is equivalent to national income.

Each action in an economy comprises a buyer and a seller. Households spend cash for acquiring goods and services exhibited. Firms make a production settlement. Households are employing units which incorporate output created in the business firms