The circular flow model:
A) assumes that central planning is taking place.
B) illustrates how natural resources are created.
C) illustrates how money is created by the banking system.
D) illustrates the interdependence of businesses and consumers.

Question

Quizplus · Accepted Answer

The circular flow model is a visual representation of how businesses and consumers interact in the marketplace. It illustrates how businesses provide goods and services to consumers, who in turn provide money to businesses. This interdependence is essential for the economy to function. The model does not assume central planning, explain how natural resources are created, or illustrate how money is created by the banking system.

The Circular Flow Model