Question

Question 4

In the context of the circular flow model of the economy, which of the following best describes the relationship
between households, businesses, and the government?
A. Households earn income by buying goods and services in the product market, spend that income
on businesses, and pay taxes to the government, which then uses the revenue to provide
resources.
B. Households earn income by providing resources, spend that income on goods and services in the
product market, and pay taxes to the government, which then uses the revenue for public services.
c. Households earn income by paying taxes to the government, which then uses that revenue to buy
goods and services from businesses, and businesses use the income to pay wages to households.
D. Households earn income by providing resources to the government, which then redistributes that
income among businesses to stimulate production and spending.

Answer 1

Option B, Households earn income by providing resources, spend that income on goods and services in the product market, and pay taxes to the government, which then uses the revenue for public services, best describes the relationship between households, businesses, and the government in the circular flow model of the economy.

Step-by-step explanation:

In the context of the circular flow model of the economy, households, businesses, and the government have an interconnected relationship.

In option B, households earn income by providing resources, spend that income on goods and services in the product market, and pay taxes to the government, which then uses the revenue for public services. This option accurately reflects the flow of income, expenditure, and taxation in the circular flow model.

Therefore, option B, Households earn income by providing resources, spend that income on goods and services in the product market, and pay taxes to the government, which then uses the revenue for public services, best describes the relationship between households, businesses, and the government in the circular flow model of the economy.

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