Households supply their resources in the factor markets in exchange for money, which is subsequently spent in the product markets.

Question

Quizplus · Accepted Answer

This is a basic concept of the circular flow of income model in economics, where households provide their labor, land, and capital in the factor markets and receive payment in the form of wages, rent, and interest. This money is then spent in the product markets on goods and services produced by firms, completing the circular flow of income.

Households Supply Their Resources in the Factor Markets in Exchange