1 2 3 4 5 6 In the circularflow diagram households and firms

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In the circular-flow diagram, households and firms are the decision makers. O a. TRUE b. FALSE

Solution

Answer 1:- TRUE

In circular flow diagram all pervasive problem of scarcity of resources is addressed by making decisions or chosing between the options. The three decision makers are households, firms and the government.

Answer 2:- A the flow of factors production are also part of the inner loop.

In the circular flow the consumers provide the factors of production and then consume the products. This is shown by the inner loop whereas revenue generated and expenses incurred are shown by the outer loop.

Answer 3:- B flow of inputs from households to firms.

One of the two loops show the money circulated in the economy and the other the production and consumption of goods and services. The inner loop shows the flow of inputs from households to firms, as houselds provide inputs required for factors of production.

Answer 4 :- D All are correct.

Economists like scientist collect data use scientific method take observation and then reach to theories. These theories are further used. Thus D all the options are correct.