Question

The circular flow diagram involves two types of markets, for goods and services and for factors of production. Which statement is true?

a. In both markets the firms are the sellers
b. In both markets the household are the sellers
c. Households are buyers of goods and services and sellers of factors of production
d. Households are sellers of goods and services and buyers of factors of production

Answer 1

The correct statement is d. Households are sellers of goods and services and buyers of factors of production.

Step-by-step explanation:

The correct statement is d. Households are sellers of goods and services and buyers of factors of production. In the circular flow diagram, households play a dual role of consumers and suppliers. They are buyers of goods and services in the product market, where they purchase goods and services from firms. Additionally, households are sellers of factors of production, such as labor, land, and capital, in the resource market, where they provide these resources to firms.