In The Circular Flow Model Businesses. Each sector of the economy contributes to the others. In this way money flows in a circular manner from the business sector to the household sector and from the household sector to the business sector in the economy.
Each sector of the economy contributes to the others. The circular flow model in economics is critical for thriving societies. The circular flow model is an economic model that shows the flow of money through the economy.
More detailed circular flow models sometimes include the role of government financial institutions and foreign firms in the conduct of business.
There are real flows of goods services and resources but not money flows. Understanding the circular flow model the circular flow model starts with the household sector that engages in consumption spending c and the business sector that produces the goods. A circular flow model of the economy is a graphical representation of the movement of money between three sectors businesses households and the government and three markets production factors products and the financial market. The most common form of this model shows the circular flow of income between the household sector and the business sector.
