In the simple circular-flow diagram, the participants in the economy are
A)firms and government.
B)households and firms.
C)households and government.
D)households, firms, and government.

Question

Quizplus · Accepted Answer

In the simple circular-flow diagram, the economy consists of two main participants: households and firms. Households provide factors of production to firms, and in return, they receive income. Firms produce goods and services that households buy. This model simplifies economic interactions by not including the government or foreign markets.

In the Simple Circular-Flow Diagram, the Participants in the Economy