Question

How do households and firms play a role in the economy and the growth of the economy? Please cite at LEAST one source beyond the text to support your response.

Answer 1

Following are roles of firms and households in economy:

Households: households play critical role in economy and growth of the economy. Households supply crucial factors of production and further, these households also create new demand for goods and services. These demands incentivise new output. Households pay taxes as well which are used by the government for achieving high growth rate.

Firms:  Firms employs factors of production and create output thereby increases employments. Firms are critical units in growth and development of economy. Firms also pay taxes which are used by the government to create infrastructure and public services.

Source:

http://business.baylor.edu/Tom_kelly/2307ch4.htm