In the circular flow model, the flow of dollars from firms to households is paid _____, and the flow of dollars from households to firms is paid _____.

In the circular flow model, the interaction between households and firms is fundamental to understanding how the economy operates. The flow of dollars from firms to households represents the payments made by firms for the services provided by households, which include labor, land, and capital. This payment is composed of wages (for labor), capital income (such as interest and rents), and profits that firms distribute to their owners. These are essential components of the income that households receive, which they then use to support consumption and savings.

On the other hand, the flow of dollars from households to firms occurs when households purchase goods and services produced by those firms. This transaction is critical as it reflects the consumption of finished products and services, which drives demand in the economy. Thus, households spend their income on various goods and services, which enables firms to generate revenue and further their production processes.

Therefore, this connect between the two flows illustrates the interdependence between households and firms, essential for maintaining economic equilibrium in the circular flow model. This understanding of the flows of dollars is crucial for analyzing economic activity, including the effects of fiscal and monetary policies on the economy.