The flow of goods and services from the producer to the consumer is known as which of the following in the circular flow diagram?

• A. Factor flow
• B. Nominal flow
• C. Monetary flow
• D. Real flow

Answer: (D)

Verified step by step guidance

1. Understand the circular flow diagram, which illustrates the movement of goods, services, and money between different sectors of the economy, typically households and firms.
2. Identify that the 'flow of goods and services' refers to the actual physical products and services moving from producers (firms) to consumers (households).
3. Recall that in the circular flow model, the movement of goods and services is called the 'real flow' because it represents tangible items and services exchanged in the economy.
4. Differentiate this from 'monetary flow,' which represents the money payments made in exchange for goods and services, and 'factor flow,' which involves the movement of factors of production like labor and capital.
5. Conclude that the correct term for the flow of goods and services from producer to consumer in the circular flow diagram is the 'real flow.'