Circular Flow Of Income
The circular flow model is a useful tool for measuring a nation's income and understanding the relationships between different sectors in the economy. It depicts the flow of money, goods, and services between households and businesses, and shows the cyclical nature of economic resources. It is also used to highlight the impact of factors like taxation on the economy.
The circular flow of income is a concept that illustrates the flow of money, goods, and services between households and businesses within an economy. It provides a visual representation of how money moves through the economy. In this model, households provide factors of production, such as labor and capital, to businesses in exchange for income. In turn, businesses use these factors of production to produce goods and services, which are then sold to households. This creates a continuous circular flow of income, expenditure, and production within the economy. The model also accounts for the role of the government and the foreign sector in the flow of income and expenditure.
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