Question

    Which of the following elements is NOT included in the

    circular flow of Income in a simple economy?
    A Factor payments Correct Answer Incorrect Answer
    B Goods and services Correct Answer Incorrect Answer
    C Depreciation Correct Answer Incorrect Answer
    D Spending Correct Answer Incorrect Answer

    Solution

    The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. Depreciation has a significant effect in determining and presenting the financial position and results of operations of an enterprise. Hence, Depreciation is NOT included in the circular flow of Income in a simple economy.

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