The simple circular flow model shows that
A)households are on the demand side of both the product and resource market
B)firms are on the demand side of both the product and resource market
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 simple circular flow model shows that households supply resources (such as labor) to firms in the resource market, and demand goods and services from firms in the product market. Therefore, households are on the supply side of the resource market and the demand side of the product market. Firms, on the other hand, demand resources (such as labor) from households in the resource market, and supply goods and services to households in the product market. Neither firms nor governments are explicitly involved in the loanable funds market in the simple circular flow model.

The Simple Circular Flow Model Shows That