Which two basic markets are depicted in the simple circular flow model?

• A. the labor market and the foreign exchange market
• B. the stock market and the bond market
• C. the product market and the factor market
• D. the goods market and the government market

Answer: (C)

Verified step by step guidance

1. Understand that the simple circular flow model illustrates the flow of goods, services, and resources between different sectors of the economy.
2. Identify the two main types of markets in this model: one where households buy goods and services from firms, and another where firms buy resources (factors of production) from households.
3. Recognize that the market where goods and services are exchanged is called the product market.
4. Recognize that the market where factors of production (like labor, land, and capital) are exchanged is called the factor market.
5. Conclude that the two basic markets depicted in the simple circular flow model are the product market and the factor market.