Final answer:
A context diagram is a high-level, simplified diagram that demonstrates the interactions between a system and its environment, distinct from diagrams showing internal system activities or data flows.
Step-by-step explanation:
A context diagram is a very simple and quick-to-draw diagram that represents a system as a single process and shows how it interacts with external entities. In response to your question, the correct answer is (4) A diagram that illustrates the interactions between a system and its environment.
The context diagram places the system of interest as a central bubble (the single process), often referred to as 'the system under study,' and around it, there are external factors or entities shown as rectangles or circles that define where the data comes from and where it goes.
Though a context diagram might appear similar to other diagrams, such as the circular flow diagram used in economics to represent interactions between households and firms in the markets, it's specific to representing the external interactions of a system rather than internal data flows or activities within the system itself.