If Lauren builds a circular-flow diagram including markets for goods and services, markets for factors of production and firms, will the model be able to accurately represent a simple economy?

Question

Quizplus · Accepted Answer

The circular-flow diagram is a simple economic model that shows the flow of goods and services and factors of production between firms and households. Without including households, the model would not accurately represent the exchanges in a simple economy, as households are essential for providing factors of production (like labor) and for consuming goods and services.

If Lauren Builds a Circular-Flow Diagram Including Markets for Goods