In the circular flow model
A) households demand goods and services which are supplied by firms, and the firms demand resources that are supplied by intermediate firms.
B) households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.
C) households buy goods and services and firms supply goods. Resources are supplied by other firms.
D) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from firms.

Question

Quizplus · Accepted Answer

The circular flow model shows the movement of goods, services, and resources between households and firms. In this model, households demand goods and services from firms while supplying resources such as labor, capital, and natural resources that are demanded by firms. This creates a circular flow of income and production within an economy. Therefore, B is the correct choice as it accurately describes the flow of goods, services, and resources in the circular flow model.

In the Circular Flow Model