In the simple circular flow model,
A)households spend the money they receive from labour services but save the money they receive from selling the other factors of production.
B)businesses buy labour services from households,but supply other factors of production themselves.
C)households spend their entire income immediately on consumer products.
D)profits are a type of income that is not received by households.

Question

Quizplus · Accepted Answer

In the simple circular flow model, households spend their entire income on consumer products, reflecting the assumption that all income earned by households is immediately used to purchase goods and services from businesses. This model simplifies the economic interactions between households and businesses, ignoring savings, investments, and other complexities of the real economy.

In the Simple Circular Flow Model