A theory or model is a simplification of reality, in much the same way that a road map shows only those features needed to get from one point to another.

The circular flow of income shows

A) the dollar value of output is less than the total income. B) the dollar value of output is exactly equal to the total income. C) the dollar value of output is more than the total income because of the existence of profits. D) the dollar value of output is more or less than the total income, depending on whether profits are positive or negative.

Open market sales of bonds by the Federal Reserve do not have a direct effect on the government budget

a. True b. False