In a simple circular-flow diagram, what are the two primary entities?
Understand the Problem
The question asks us to identify the two main actors or participants represented in a simplified circular-flow diagram, which is a basic economic model illustrating the flow of goods, services, and money in an economy.
Answer
The two primary entities are households and businesses.
In a simple circular-flow diagram, the two primary entities are households and businesses (or firms). These entities interact in the markets for resources and goods/services.
Answer for screen readers
In a simple circular-flow diagram, the two primary entities are households and businesses (or firms). These entities interact in the markets for resources and goods/services.
More Information
The circular flow diagram is a simplified representation of the economy that illustrates the flow of goods, services, and money between households and businesses.
Tips
A common mistake is thinking that the government is one of the primary entities in a simple circular flow diagram. While the government does play a role in the economy, the most basic model focuses on households and businesses.
Sources
- Circular Flow Model | Definition & Examples - Lesson - Study.com - study.com
- Circular Flow Model Definition and Calculation - Investopedia - investopedia.com
- Concept 15: Circular Flow of the Economy - gpb.org
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