Which statement is TRUE within the circular flow of economic activity?
A) Households are buyers of products and sellers of production factors.
B) Business firms are buyers and sellers of production factors.
C) Households are sellers of products and buyers of production factors.
D) Business firms are buyers of products and sellers of production factors.

Question

Quizplus · Accepted Answer

In the circular flow of economic activity, households are the owners of production factors such as labor and capital, which they sell to businesses in exchange for income. They then use that income to purchase goods and services from businesses, making them buyers of products. Therefore, option A which states that households are buyers of products and sellers of production factors is the only true statement.

Which Statement Is TRUE Within the Circular Flow of Economic