Question

A circular flow model shows the interrelationship between the​ ____ markets and the​ ____ markets. A. ​goods; factor B. ​expenditure; income C. ​business; household D. ​household; goods E. ​household; factor

Answer 1

Answer:

A.

Explanation:

The assumptions of the circular flow model are the characteristics of capitalism.

A capitalist system is based in voluntary exchanges, that are necessary to ensure a competitive marketplace. Consumers are not forced to purchased from a single seller.

In a simple circular flow model exchanges take place between two major sectors:

-business firms, want to sell goods and services and purchase factors of production.

-consumer households, want to purchase goods and services and sell their factors of production.

Exchanges take place between business firms and consumer households in the markets of the economy. This exchanges are called flows of economic activity.

In each market ther is a money flow (payment). And real flow, good, service or factor of production for which a payment is made.