Question

4. Label each side of the circular flow diagram, along with the factors being exchanged. Below the

Answer 1

The Circular flow diagram is an optical representation of the economy that shows how dollar flows through the market.

Explanation:

• The market in terms of goods and services where people will purchase goods and services. In  terms of factors of production where the company or concern purchase the factors of production from the households.
• The companies sell the goods and services that they have produced where the people buy the product and revenue is paid. In the deal of money flows from company to household as a wages or salary.
• The diagram explains the roles and it would help us to understand how the economy is organized.