The simple circular ﬂow model shows that _____.
A) ﬁrms supply inputs to households and households supply output to ﬁrms
B) households supply goods and services to the economy
C) ﬁrms supply output to households and households supply inputs to ﬁrms
D) households supply both output and inputs to the economy

Question

Quizplus · Accepted Answer

In the simple circular flow model, firms produce goods and services (output) which they supply to households. In return, households provide firms with the necessary inputs (such as labor) to produce these goods and services. This model illustrates the interdependence between households and firms in the economy.

The Simple Circular ﬂOw Model Shows That _____