In the circular flow model, households ______ resources and ______ products.

• A. produce; consume
• B. sell; buy
• C. demand; supply
• D. supply; demand

Answer: (D)

Verified step by step guidance

1. Understand the roles of households and firms in the circular flow model: households provide factors of production (resources) such as labor, land, and capital, while firms produce goods and services (products).
2. Recognize that households 'supply' resources because they offer their labor, land, and capital to firms in exchange for income (wages, rent, interest, profits).
3. Identify that households 'demand' products because they use their income to purchase goods and services produced by firms.
4. Recall the basic principle of the circular flow model: households supply resources to firms and demand products from firms, creating a continuous flow of goods, services, and money.
5. Conclude that the correct completion of the sentence is: 'In the circular flow model, households supply resources and demand products.'