In the circular flow model, which type of flow goes from households to firms as they supply labor and other resources?

• A. Money and resources
• B. Land and capital
• C. Technology and information
• D. Resources

Answer: (D)

In the circular flow model, households supply the inputs that firms use to produce goods and services. These inputs, called factors of production, include labor, land, and capital. The flow from households to firms represents this real, physical input side, not money. The term that best captures all of these inputs is resources, since it covers labor and the other inputs households provide. Money moves in the opposite direction as firms pay households for these resources, so money and resources together describe the two-way exchange, but the from-households-to-firms flow specifically is resources.