In the circular flow model, the flow of dollars from firms to households is paid _____ and the flow of dollars from households to firms is paid _____.
A) as wages and profits; for goods and services
B) for value added; as imputed values
C) in current dollars; in constant dollars
D) as interest and dividends; for depreciation and taxes

Question

Quizplus · Accepted Answer

Firms pay wages to households for their labor services, and they distribute profits to owners of business (who also may be households). Households then use their income to purchase goods and services from firms, which completes the flow of dollars.

In the Circular Flow Model, the Flow of Dollars from Firms