Question

In the circular flow model, a. resources flow to the households from the firms through the product market. b. money flows from the households to the firms through the resource market. c. money flows from the households to the firms through the product market. d. money flows from the firms to the households through the product market. e. money flows from the households to the firms through both the product market and the resource market.

Answer 1

Answer:

E) Money flows from the households to the firms through both the product market and the resource market.

Explanation:

In the circular flow model, households provide the factors of production in the factor markets (in the question, referred to as the resource market). These factors are labor, land, and capital. Firms pay for labor in the form of wages, and for land and capital in the form of rents.

Next, firms use the factors of production as input, and the output is sold in the goods and services market (referred to as the product market in the question). This products are bought by household, closing the circular flow model..