In the circular flow of income, the allocation of resources is largely decided by
A)central authorities and firms only.
B)individuals only.
C)central authorities only.
D)firms and households acting independently.
E)political parties and firms only.

Question

Quizplus · Accepted Answer

In the circular flow of income, firms and households act independently by making decisions regarding the allocation of resources. Firms decide the amount of resources to be used in production and the price of their products. Households decide how to allocate their income for consumption and saving. There is no central authority or political party involved in making these decisions in a free market economy.

In the Circular Flow of Income, the Allocation of Resources