Question

Choose the statements that CORRECTLY describe the circular flow of goods and services.

1.) Businesses use human resources to produce goods & services for the Product Market.
2.) Households consume goods from the Factor Market.
3.) Businesses get revenue when Households spend money in the Product Market
4.) Businesses use resources from the Product Market to produce goods and services.
5.) Households provide resources to the Business Sector.
a) 1, 2, and 4
b) 1, 3, and 5
c) 2, 3, and 4
d) All of the above

Answer 1

The circular flow of goods and services includes businesses producing and selling to households in the product market, and households providing resources to businesses in the factor market.

Step-by-step explanation:

The correct statements that describe the circular flow of goods and services are:

• Businesses use human resources to produce goods & services for the Product Market.
• Businesses get revenue when Households spend money in the Product Market.
• Households provide resources to the Business Sector.

Households consume goods from the Product Market (not the Factor Market). Businesses use resources from the Factor Market (such as labor, land, and capital) to produce goods and services. This interaction of households and businesses in different markets forms a circular economic flow.