The economy's income and expenditure The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
Based on this model, households earn income when ________ purchase _________ in markets for factors of production.
(i) firms; labor and capital
(ii) households; goods and services
