In a simple circular flow model,
A)households are suppliers of resources.
B)firms are suppliers of final products.
C)households are demanders of final products.
D)firms are demanders of resources.
E)all of the answers are true.

Question

Quizplus · Accepted Answer

All of the answers are true in a simple circular flow model. Households provide resources to firms while in turn, the firms supply final products to households. This creates a circular flow of goods and services between the two sectors. Moreover, both households and firms are also involved in the factor markets and product markets, respectively, as they demand resources and final products, respectively.

In a Simple Circular Flow Model