In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income? A. Every penny spent on a good or service must end up as someone's income. B. People tend to spend all of their income on goods and services. C. Domestic expenditures on imports generally equal foreign expenditures on U. S. exports. D. Taxes on the production of goods and services are determined according to individual income.

A. Every penny spent on a good or service must end up as someone's income.

Explanation:

Circular flow of income is an economic model that shows the major exchanges represented by flows of money, goods and services amongst economic agent within the economy. In the circular flow, the value of income is always equal to the value of production because every money in the flow must always end up in an economic agent's "pocket".

The value of production in an economy must equal the total value of income in the circular flow of expenditure and income because:

A. Every penny spent on a good or service must end up as someone's income.

Explanation:

The circular flow of expenditure is a macroeconomic model that explains economic systems at the nation's level. The circular flow expenditure has two sides, one is for firms and the other for households. Building an exchange of wealth and products from one side to the other. Balancing the sides and providing them with wealth that can be used by the other side to create profit from it. Thus, in this paradigm or theory, we can understand that every cent spent on a good or service has to be someone else's' income because it is a permanent exchange of resources that allow it to work.