-Refer to the figure.If box B represents the factor market and flow (3)represents money income,then:
A) box A is the product market and box C is households.
B) box C is the product market and box A is households.
C) box D is the product market and box C is households.
D) box C is the product market and box D is households.

Question

-Refer to the figure.If box B represents the factor market and flow (3)represents money income,then:
A) box A is the product market and box C is households. 
B) box C is the product market and box A is households. 
C) box D is the product market and box C is households. 
D) box C is the product market and box D is households.

Quizplus · Accepted Answer

In the circular flow model, the factor market (box B) is where households provide factors of production to firms and receive money income (flow 3). Therefore, box C represents households, and box D represents the product market where goods and services are exchanged.

-Refer to the Figure