Which of the following best characterizes the circular flow of income?
A) Businesses buy resources from the government, and households buy goods and services from businesses.
B) Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
C) The government purchases resources from businesses and households and then sells goods and services to businesses and households.
D) Households buy factors of production from businesses, and businesses buy goods and services from households.

Question

Quizplus · Accepted Answer

The circular flow of income model shows that businesses buy resources (like labor, land, and capital) from households. In return, households receive income, which they then spend on goods and services produced by businesses. This creates a continuous flow of money and resources between households and businesses.

Which of the Following Best Characterizes the Circular Flow of Income