Question

In the circular flow diagram model:

a) households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

b) businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

c) households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.

d) Both (a) and (b) are correct.

Answer 1

The circular flow diagram in economics shows how households and businesses interact in the market, with households providing inputs to businesses and receiving income in return. Both options (a) and (b) are correct.

Step-by-step explanation:

The circular flow diagram in economics shows how households and businesses interact in the market. In this model, households provide inputs such as labor services to businesses, and in return, they receive income, which can be used to buy goods and services from businesses. So, option (a) is correct. On the other hand, businesses receive revenues from households in exchange for providing goods and services, and they use those revenues to buy inputs, including labor services, from households. Therefore, option (b) is also correct. Hence, the answer is d) Both (a) and (b) are correct.