The simple circular ﬂow model shows that
A) households are on the buying side of both product and resource markets.
B) businesses are on the selling side of both product and resource markets.
C) households are on the selling side of the resource market and on the buying side of the product market.
D) businesses are on the buying side of the product market and on the selling side of the resource market.

Question

Quizplus · Accepted Answer

In the simple circular flow model, households provide the factors of production (resources) to businesses in exchange for income, which they then use to purchase goods and services from businesses. As a result, households are sellers in the resource market and buyers in the product market. Businesses, on the other hand, are buyers in the resource market (they need resources to produce goods and services) and sellers in the product market. Therefore, choice C is correct.

The Simple Circular ﬂOw Model Shows That