The circular flow diagram shows that the sum of the resource market and the product market must equal the total payments going to the business market.

Question

Quizplus · Accepted Answer

The circular flow diagram illustrates the flow of goods and services between households and firms in the product market and the flow of resources and payments in the resource market. It does not imply that the sum of the resource market and the product market equals the total payments going to the business market; rather, it shows the interdependence between households and firms and how money and resources circulate within the economy.

The Circular Flow Diagram Shows That the Sum of the Resource