Question

Circular flow is related to which of the following?

• A. Production
• B. Income
• C. Expenditure
• D. All of these

Hint:

Remember the circular flow diagram — households provide factors of production, firms provide goods, and money flows both ways as income and expenditure.

Answer 1

The Correct Option is D

Step 1: Understanding circular flow.
The circular flow of income in economics shows the movement of money, goods, and services between households and firms.
Step 2: Components.
It involves production (firms producing goods), income (earned by households in return for factors of production), and expenditure (household spending on goods and services).
Step 3: Analyzing the options.
(A) Production: Yes, part of the flow.
(B) Income: Yes, income flows to households.
(C) Expenditure: Yes, households spend income.
(D) All of these: Correct — all are part of circular flow.
Step 4: Conclusion.
Thus, the circular flow is related to Production, Income, and Expenditure, i.e., all of these.