The circular flow diagram of economic activity is a model of the:
A) flow of goods, services, and payments between households and firms.
B) influence of government on business behaviour.
C) role of unions and government in the economy.
D) interaction among taxes, prices, and profits.

Question

Quizplus · Accepted Answer

The circular flow diagram of economic activity illustrates the flow of goods, services, and payments between households and firms, showing how these two groups interact in the markets for goods and services and in the markets for factors of production.

The Circular Flow Diagram of Economic Activity Is a Model