Asked by

Manav Prasher
on Oct 26, 2024

verifed

Verified

The simplest circular-flow model shows the interaction between households and firms.In this model:

A) only barter transactions take place.
B) households and firms interact in the market for goods and services,but firms are the only participants in the factor markets.
C) firms supply goods and services to households,which in turn supply factors of production to firms.
D) attention is focused on real flows of goods,services,and factors of production,but money flows between households and firms are ignored for simplicity.

Circular-Flow Model

The circular-flow model is an economic diagram that illustrates how households and firms interact through markets for products and resources, depicting the continuous flow of money and resources.

Households

Economic units comprising individuals living together, making joint decisions about consumption and production.

Firms

Business entities or organizations engaged in commercial, industrial, or professional activities, either for profit or non-profit.

  • Master the fundamentals of the circular-flow framework in an economy and its integral parts.
verifed

Verified Answer

GO
Grace OhunyonOct 29, 2024
Final Answer:
Get Full Answer