The circular-flow diagram shows the flow of _____ and the flow of _____.

Question

Quizplus · Accepted Answer

The circular-flow diagram demonstrates the two-way flow of money and goods/services between households and firms. The households pay money to the firms for goods and services and firms pay money to households for factors of production (land, labor, capital, and entrepreneurship). Therefore, the flow of money and the flow of goods/services are the two important elements shown in the diagram.

The Circular-Flow Diagram Shows the Flow of _____ and the Flow