The Circular Flow of Income Model is an important idea that helps us understand how our economy works. It shows how money moves around among different parts of the economy.
Households: These are people who provide work and earn money. For example, if you have a job in a store, you get paid a salary.
Firms: These are businesses that pay households for their work and create goods and services. When a firm sells something, it makes money, which keeps the flow going.
Government: The government collects taxes from both firms and households. It then uses that money to pay for services like schools and roads, putting money back into the economy.
This ongoing flow of money keeps the economy going strong. It shows how all the different parts are connected and depend on each other!
The Circular Flow of Income Model is an important idea that helps us understand how our economy works. It shows how money moves around among different parts of the economy.
Households: These are people who provide work and earn money. For example, if you have a job in a store, you get paid a salary.
Firms: These are businesses that pay households for their work and create goods and services. When a firm sells something, it makes money, which keeps the flow going.
Government: The government collects taxes from both firms and households. It then uses that money to pay for services like schools and roads, putting money back into the economy.
This ongoing flow of money keeps the economy going strong. It shows how all the different parts are connected and depend on each other!