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How money changes hands!
In the Circular Flow Model there are 2 groups: Households (the people) Firms (companies and businesses)
Households need goods and services so they give their money to the firms. Firms then give the goods and services to the households.
Household Firms Money given to firms Goods and services given to households
Resources that firms need include labor, capital and land. These are supplied by the households in exchange for their salary or wages!
Household Firms Money given to households Resources given to firms
Household Firm Money given to firms Goods and services given to households Money given to households Resources given to firms
Circular Flow of a Market Economy
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The Circular Flow Spending Goods and services bought Revenue Goods and services sold Labor, land, and capital Income = Flow of inputs and outputs.
The Simple Circular Flow Model
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Circular Flow Model The Circular Flow Model describes and captures how the economy interacts with one another!!!
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Circular Flow Diagrams
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