Which markets are represented in the simple circular-flow diagram?
A)markets for goods and services and markets for financial assets
B)markets for factors of production and markets for financial assets
C)markets for goods and services and markets for factors of production
D)markets for goods and services and markets for imports and exports

Question

Quizplus · Accepted Answer

The simple circular-flow diagram represents the flow of goods and services between households and firms, indicating the markets for goods and services. It also shows the flow of factors of production, such as labor and capital, indicating the markets for factors of production. Therefore, the correct answer is C, which includes both markets for goods and services and markets for factors of production. Option A is incorrect because it only includes markets for goods and services and financial assets, while option B only includes markets for factors of production and financial assets. Option D is incorrect because it omits the markets for factors of production.

Which Markets Are Represented in the Simple Circular-Flow Diagram