Question

What does a circular flow of a market economy show?
Group of answer choices

how households and firms exchange money, resources and products.

how households and firms need the same resources at the same time.

how firms control employee wages and salaries.

how households choose the goods and services they buy.

Answer 1

The circular flow of a market economy shows **how households and firms exchange money, resources and products**. This model illustrates the interactions between households, which provide labor and consume goods and services, and firms, which produce goods and services and pay for the labor provided by households.