Question

Which of the following best explains why the circular flow model

characterizes the free-market system?
O
A. Production decisions follow the cycles of nature.
B. Consumers and producers influence each other in a circular
fashion.
O
C. Profits flow in a circular way back and forth between different
producers.
O
D. Producers recycle products discarded by producers.
SUBMIT

Answer 1

B. Consumers and producers influence each other in a circular fashion

Answer 2

The answer is B. The circular model illustrate the flow of income and expenditure, and expresses how change by with consumers or producer can influence the other. If consumers were spending less, then producers would lower their production to match the consumer demand for that good or service.