In the circular flow, how are the value of production, income, ...

[kshipps]

In the circular flow, how are the value of production, income, and expenditures related?
 
  A) They have no relationship to each other.
  B) Once tax payments are subtracted at each stage, they are equal.
  C) Expenditures on GDP equals the value of production which equals income.
  D) Once net exports of goods and services are subtracted from GDP, all three are equal.
  E) Value of production always equals income, but expenditures is smaller because households save some of their income and do not spend it.

Question 2

Which of the following statements is not compatible with the opportunity cost theory?
 
  A) Demand plays a role in the determination of costs.
  B) Labor costs depend upon the demand for labor.
  C) Relative prices reflect the relative amount of human labor required to produce goods.
  D) Supply as well as demand depends upon subjective preferences.

[asware1]

Answer to Question 1

C

Answer to Question 2

C