C) The circular-flow diagram shows how households and firms. B) The circular-flow diagram shows how firms are linked through product and factor markets. In its purest form, a command economy answers the three economic questions by making allocation decisions centrally by the government. What is the circular-flow diagram and what does it illustrate A) The circular-flow diagram shows the government's role in markets through taxes and transfer payments. In its purest form, a market economy answers the three economic questions by allocating resources and goods through markets, where prices are generated. In the circular flow diagram with government, what does the government receive directly from househol O factors of production O taxes O goods and services O. The payment to entrepreneurs who start or own businesses The payment firms make to households in exchange for capital The payment firms make to households in exchange for land The payment firms make to households in exchange for their labor Where firms supply goods and services to households in exchange for moneyĪ system of allocating the means of production and the goods and services produced in an economy Where households supply land, labor, capital, and entrepreneurship/technology to firms in exchange for money The owners of resources-supplied to firms in the resource market-and the buyers of goods and services-demanded from firms in the product marketīusiness entities that demand land, labor, and capital from households in the resource market and produce goods and services, which they supply to households in the product market A place where buyers and sellers meet to engage in mutually beneficial, voluntary exchanges of goods, services, or productive resources
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