According to the circular-flow model, final goods are produced by which of the following?

• A. the government
• B. firms
• C. households
• D. financial institutions

Answer: (B)

Verified step by step guidance

1. Understand the circular-flow model, which illustrates how goods, services, and money move through an economy between different sectors.
2. Identify the main participants in the circular-flow model: households, firms, government, and financial institutions.
3. Recall that households provide factors of production (like labor, land, and capital) to firms in exchange for income.
4. Recognize that firms use these factors of production to produce final goods and services.
5. Conclude that in the circular-flow model, final goods are produced by firms, not households, government, or financial institutions.