Concept:The diagram shows how money and resources move between households and firms in an economy.
Explanation:In the diagram, firms supply goods and services, while households supply factors of production like labour, land, and capital.
Money flows from firms to households as wages, rent, interest, and profit.
Households then spend this income on goods and services produced by firms.
This creates a continuous cycle of income and expenditure between the two sectors.
Because it only includes households and firms, the diagram represents a two-sector economy.
This movement of resources and money in a closed loop is known as the circular flow of income.
Answer:D. Circular flow of income
