Question
How does the circular flow of income primarily affect households or firms?
It establishes the number of people residing in a household.
It dictates the kinds of goods and services that firms produce.
It determines who is hired and who is fired at the majority of businesses.
It provides the income that workers need to live and the revenue that businesses need to run.
It establishes the number of people residing in a household.
It dictates the kinds of goods and services that firms produce.
It determines who is hired and who is fired at the majority of businesses.
It provides the income that workers need to live and the revenue that businesses need to run.
Answers
GPT-4o mini
The circular flow of income primarily affects households and firms in that **it provides the income that workers need to live and the revenue that businesses need to run.**
In the circular flow model, households supply factors of production (like labor) to firms, and in return, they receive income in the form of wages. This income allows households to purchase goods and services that firms produce, generating revenue for those firms. This relationship creates a continuous flow of money and resources between households and firms, which is essential for the functioning of the economy.
In the circular flow model, households supply factors of production (like labor) to firms, and in return, they receive income in the form of wages. This income allows households to purchase goods and services that firms produce, generating revenue for those firms. This relationship creates a continuous flow of money and resources between households and firms, which is essential for the functioning of the economy.