Question

When considering the circular flow of economic activity​, households supply resources​ (inputs) such that the resources supplied by the households may be thought of as being provided in individual markets. Which of the following accurately describes this​ statement?A. In the capital​ market, households loan accumulated savings to firms in exchange for labor income.B. In the capital​ market, households loan inherited savings to firms in exchange for claims on past profits.C. In the labor​ market, households earn wages by supplying labor to firms that demand it.D. In the land​ market, households supply land or raw materials in exchange for claims on future profits.

Answer 1

C. LABOUR MARKET - HOUSEHOLDS EARN WAGES BY SUPPLYING LABOUR DEMANDED BY FIRMS

Step-by-step explanation:

Circular flow of income (2 sector) involves REAL Flow and MONEY Flow exchange between households and Firms

* Households provide firms with Factors of Production (FOP) - Land , LABOUR , Capital , Entrepreneur [REAL FLOW]

for Returns to FOP - Rent , WAGES , Interest , Profit [MONEY FLOW]

* Firms provide goods and services to households [REAL FLOW]

for Prices from households to firms [MONEY FLOW]