Based on the circular flow of business, what are two ways that households impact the economy? A) They provide wages and products for consumption. B) They purchase resources and provide social services. C) They purchase from the factor market and provide goods and services. D) They provide the four factors of production and spend money on the product market

Question

Dustin Barnes

Business

5 June, 04:45

Based on the circular flow of business, what are two ways that households impact the economy? A) They provide wages and products for consumption. B) They purchase resources and provide social services. C) They purchase from the factor market and provide goods and services. D) They provide the four factors of production and spend money on the product market

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Answers (1)

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Malcolm Shelton · Answer 1

D. They provide the four factors of production and spend money on the product market.

Explanation:

In circular flow of business, all the players namely; household, government agencies, firms and others in an economy have an important role to play.

The level of a nation's employment status, price level and income are determined as a result of various interactions among firms/businesses, household and government agencies.

When a unit spends money, it becomes the income of another unit. Household goes to market with their monies to buy goods and services, while firms goes to the factor market to buy the resources, which are owned by the household, to produce the goods and services.

As for the government agencies, they collect taxes on the goods and services produced and on income (both household and firms). Government also buys goods and services inorder to produce specialize goods.

Through these interactions, money and business changes hands from the household to the firm and then to government. It goes back to the household and the list goes on and on.