In the circular flow model for an economy that produces only consumption goods:
A) factor incomes flow from households to firms.
B) factors of production flow from households to firms.
C) factor incomes flow from households to firms and to the government.
D) factors of production flow from firms to households.

Question

Quizplus · Accepted Answer

In the circular flow model for an economy that produces only consumption goods, factors of production (such as labor and capital) flow from households to firms, in exchange for factor incomes (such as wages and profits) that flow from firms to households. There is no government involved in this simple model.

In the Circular Flow Model for an Economy That Produces