Question

Which of the following statements about a circular flow diagram is most accurate?

a. Goods and services flow in a clockwise direction.

b. Goods and services flow in a counterclockwise direction.

c. Product markets appear at the bottom of the diagram.

d. Factor markets appear at the left of the diagram.

Answer 1

Option 'A' is the most appropriate statement. Goods and service move in clockwise direction in a circular flow diagram.

The circular flow diagram examines the equivalence of income approach and expenditure approach to estimate the national income.A circular flow diagram shows how the expenditure approach and income approach must equal to each other, with goods and service flowing in clockwise direction and income flowing in the counterclockwise direction.

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