1. How money changes hands!

2.  In the Circular Flow Model there are 2 groups:  Households (the people)  Firms (companies and businesses)

3.  Households need goods and services so they give their money to the firms.  Firms then give the goods and services to the households.

4.  Household  Firms Money given to firms Goods and services given to households

5.  Resources that firms need include labor, capital and land.  These are supplied by the households in exchange for their salary or wages!

6.  Household  Firms Money given to households Resources given to firms

7.  Household  Firm Money given to firms Goods and services given to households Money given to households Resources given to firms