The circular flow model demonstrates
A)the role of the government in overseeing the market system.
B)the roles played by households and firms in the market system.
C)how shortages and surpluses are eliminated in a market.
D)how demand and supply for goods and services are brought into equilibrium.

Question

Quizplus · Accepted Answer

The circular flow model illustrates the interdependence of households and firms in a market economy. It shows how households provide labor and consume goods and services produced by firms, while firms provide jobs and produce goods and services for household consumption. The model does not directly address the role of government, the elimination of shortages or surpluses, or the establishment of equilibrium in the market.

The Circular Flow Model Demonstrates