APFIVE Consumption Spending in the Circular Flow Model
If households increase consumption spending in a closed economy, what immediate effect does it have on the circular flow model?
A
It only influences government spending with no effect on household incomes.
B
It increases the flow of funds to firms, boosting production and income for households.
C
It solely impacts the factor market without altering the product market.
D
It decreases the flow of resources to firms, thus reducing production and incomes.
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