The flow of goods services and money between households and businesses in the free market can be represented as flowing a) from household to businesses only b) in a circle c) from business to households only d) from household and small businesses to large corporations

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Howie

1 May, 05:32

The flow of goods services and money between households and businesses in the free market can be represented as flowing a) from household to businesses only b) in a circle c) from business to households only d) from household and small businesses to large corporations

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Paula Lucas · Answer 1

b) in a circle

Explanation:

The circular flow of income is a model that is often used in economics (particularly macroeconomics) to represent how goods, services and businesses are exchanged between economic agents. In this model, businesses and individuals are the basic economic agents. Individuals provide labour, and this enables businesses to produce goods and services, which are then consumed by the individuals. If we think of this in terms of income, we can say that businesses provide income to individuals in exchange for their labour, and this income is then used to purchase goods and services from businesses.

Julius Patton · Answer 2

While the flow of goods is one-sided (from businesses to households) and the flow of services are usually from household to businesses, the flow of money is circular, even we were to argue that money tends to flow into larger corporations it's still circular since they are invested by household's savings, so that makes letter B the correct answer.