Question

A diagram shows how income and payments made by each sector of the economy flow through to other parts of the economy. What does the diagram represent?

1) The circular flow of income and payments in the economy
2) The distribution of wealth among different sectors of the economy
3) The impact of government policies on the economy
4) The relationship between supply and demand in the economy

Answer 1

The circular flow diagram represents the circular flow of income and payments in the economy.

Step-by-step explanation:

The circular flow diagram represents the circular flow of income and payments in the economy. In this diagram, firms produce goods and services, which they sell to households. Households, in turn, provide labor services to firms and receive payment in the form of wages, salaries, and benefits. The diagram shows how income and payments flow between different sectors of the economy.