What statement about the circular flow model is CORRECT?

Answer 1

The circular flow model illustrates the continuous movement of money, goods, and services between households and businesses in an economy. It shows that households provide factors of production, such as labor, to businesses in exchange for wages, while businesses produce goods and services that households purchase. This model emphasizes the interdependence of different economic agents and how their interactions contribute to the overall functioning of the economy. Additionally, it highlights the roles of government and financial institutions in facilitating these flows.