The simplest circular-flow model shows the interaction between households and firms. In this model:
a) households and firms interact in the market for goods and services, but firms are the only participants in the factor markets.
b) attention is focused on real flows of goods, services, and factors of production, but money flows between households and firms are ignored for simplicity.
c) only barter transactions take place.
d) firms supply goods and services to households, which in turn supply factors of production to firms.
