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