In the circular flow model,households

Question

Quizplus · Accepted Answer

In the circular flow model, households are the consumers of goods and services and they spend their earnings from resource sales on goods and services in the product market. Therefore, choice D is the correct answer. A is incorrect because households are not the sellers of goods and services in the input market, firms are. B is incorrect because firms spend their earnings from product sales on resources in the factor market, not households. C is incorrect because households do not hire resources from firms, they supply resources to firms through labor and land ownership.

In the Circular Flow Model,households