Question

For an economy consisting of households and businesses only, which of the following is consistent with the circular flow of income and production? (A) Households are producers of goods and services and consumers of resources. (B) Households are users of resources, and businesses are sources of saving. (C) Households are suppliers of resources and consumers of goods and services. (D) Businesses are users of taxes, and households are sources of taxes. (E) Businessesaresuppliersofresourcesand consumers of goods and services. (C) Households are suppliers of resources and consumers of goods and services.

Answer 1

Option C stands valid

Explanation:

Option A: Households does not produce goods. So this option goes invalid

Option B: It is right that Households are users of resources but businesses are not sources of savings.

Option C: This option goes valid because, the household always becomes the consumer of goods and service and in turn they act as a resource of supply.

Option D: Business are not using the tax paid by households

Option E: Business are not the consumer of goods and service. They actually create goods for consumers.