Which of the following are the two key groups of participants in the circular flow of income? yA, households and firms OB. ° C. government and financial institutions 0 D. domestic residents and foreign residents In a simple circular-flow model, there are flows of savers and borrowers and flows of 0 A. funds received from the sale of factors of production; spending on final goods and services 0 B. factors of production: goods and services C. 0 D. Both (a) and (b) are correct. None of the above; there are no flows in the circular flow of income.
Answer
1-a The factor owners spend this income on goods
which leads to a circular flow of income. This
basic circular flow of income
model consists of six assumptions: The economy
consists of two sectors: households and firms.
Households spend all of their income (Y) on goods and services or
consumption (C).
2-c
