Answer to Question #182804 in Microeconomics for Lucy

Question

The two major market types in the simple circular flow of income and expenditure are:

Public markets and private markets

Free markets and regulated markets

Factor markets and foreign exchange markets

Goods markets and service markets

Goods markets and factor markets

Answer 1

The correct answer is Goods markets and factor markets.

Explanation.

The circular flow of income depicts how money, goods, and services are exchanged in an economy. A household and a firm make up the two-flow circular income model. In exchange for money, the household purchases factors of production from the firm, while the firm purchases from the factor market. Households receive payment in return. After that, households head to the goods market to buy goods and services.