In the circular-flow diagram,
A)profit flows from households to firms.
B)labor flows from households to firms.
C)services flow from households to firms.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

In the circular-flow diagram, labor flows from households to firms as households provide labor to firms in exchange for income. Profit flows from firms to households as firms pay income to households in exchange for the labor services provided. Services do not really flow in the circular-flow diagram, rather they are exchanged between households and firms. Therefore, only option B is correct.

In the Circular-Flow Diagram