The circular-flow model shows that _____

Question

Quizplus · Accepted Answer

The circular-flow model shows that money flows in one direction while goods and services flow in the opposite direction. In other words, for each flow of money, there is an equal and opposite flow of products or resources. This means that households are on the demand side of the product market and the supply side of the resource market, while firms are on the supply side of the product market and the demand side of the resource market. Governments can be on both sides depending on whether they are purchasing goods and services or providing subsidies or taxes on resource inputs.

The Circular-Flow Model Shows That _____