The circular flow model shows that:
A)households are on the demand side of the resource market.
B)firms are on the demand side of both the product and resource markets.
C)households are on the supply side of the resource market and the demand side of the product market.
D)firms and governments are on the supply side of the loanable funds market.
E)governments are on the demand side of the product market and the supply side of the resource market.

Question

Quizplus · Accepted Answer

The circular flow model shows that households are on the supply side of the resource market, meaning they provide the resources (such as labor) that firms demand. At the same time, households are on the demand side of the product market, as they demand goods and services produced by firms. Firms are on the supply side of the product market, providing goods and services, and on the demand side of the resource market, as they demand resources to produce these goods and services. Therefore, choice C correctly identifies the position of households in both markets.

The Circular Flow Model Shows That