Question

In the simple Circular Flow Model, we use output and input markets to connect households and firms together. Which of the following statements about the market is NOT correct?

		Output market is where firms provide goods and services to households.
		Input market is where households sell or lease their labour, capital and human capital.
		Output market is where firms exchange goods and services for revenue.
		Input market is where households spend income on buying goods and services.

Answer 1

Sol :

Option (D) is correct

[Input market is where households spend income on buying goods and services]

Because circular flow of income has following four components :

• Households sold the services in the form of land, labour, capital and entrepreneurship.
• Firm In return paid the rent , wages , interest and profits tot he factor of production
• From provides goods and services to the households.
• And households in return pays the prices for the goods and services.