In the circular flow model:
A)households supply factors of production to firms.
B)households receive income through the factor market.
C)households spend income in the product market.
D)all of the above hold true.

Question

Quizplus · Accepted Answer

The circular flow model explains the flow of resources, products, and income between households and firms. In this model, households supply factors of production to firms through the factor market, such as labor, capital, land, and entrepreneurship. In exchange for these factors, households receive income. They then spend this income on goods and services produced by firms in the product market. Therefore, all three choices are true and hold true in the circular flow model.

In the Circular Flow Model