In the circular-flow diagram, which of the following is NOT considered a factor of production?

• A. Money
• B. Labor
• C. Capital
• D. Land

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of factors of production. Factors of production are the inputs used in the production of goods and services. They typically include labor, capital, land, and entrepreneurship.
2. Step 2: Identify each option in the problem and classify it according to the factors of production. Labor refers to human effort, capital refers to machinery and tools, and land refers to natural resources.
3. Step 3: Recognize that money is not a factor of production. Instead, money is a medium of exchange used to facilitate transactions but does not directly contribute to the production process.
4. Step 4: Conclude that among the options given, money is the one that is NOT considered a factor of production in the circular-flow diagram.
5. Step 5: Summarize that the circular-flow diagram shows how households provide factors of production (labor, capital, land) to firms, and firms pay income in return, but money itself is not a productive input.