Josef spent $25 for a meal at a locally owned restaurant. On which arrow is this? * Circular Flow Model Example FACTOR 7 MARKET Households sell 5 Firms buy 8 6 BUSINESSES HOUSEHOLDS Buy factors of Sell factors of . production Seli products production Buy products 3 PRODUCT 1 4 MARKET Firms sell 2

• Households buy

Option 3.

In the Circular Flow Model, households and firms interact in markets for goods and services. When Josef spends $25 for a meal, he is participating in the market where households buy products from firms.

Here are further explanations.

• Option 1: This option refers to households selling factors of production, which does not relate to the act of purchasing a meal.

• Option 2: This option indicates firms selling products, which is indeed relevant, but it does not specify the direction of the flow of money from households to firms.

• Option 3: This option suggests households buying products, which accurately describes Josef's action of spending money at the restaurant.

• Option 4: This option refers to firms buying factors of production, which is not applicable in this context as it involves the opposite flow of money.