The Circular Flow of Income Model shows how money moves in an economy. It includes a few important parts:
Households: These are the people and families. They provide things like work and money (called capital) and, in return, they get paid wages, rent, interest, and profits.
Firms: These are the businesses. They make goods and services. They pay households for their work and materials, and then they sell their products back to the households.
Government: The government collects taxes from both households and firms. They use this money to provide things like schools, roads, and other public services that everyone can use.
Foreign Sector: This includes everything that happens outside our own country, like exports (selling our goods to other countries) and imports (buying goods from other countries). This part also plays a role in how money flows.
Through all these connections, people earn money and spend it, which helps keep the economy balanced and healthy.
The Circular Flow of Income Model shows how money moves in an economy. It includes a few important parts:
Households: These are the people and families. They provide things like work and money (called capital) and, in return, they get paid wages, rent, interest, and profits.
Firms: These are the businesses. They make goods and services. They pay households for their work and materials, and then they sell their products back to the households.
Government: The government collects taxes from both households and firms. They use this money to provide things like schools, roads, and other public services that everyone can use.
Foreign Sector: This includes everything that happens outside our own country, like exports (selling our goods to other countries) and imports (buying goods from other countries). This part also plays a role in how money flows.
Through all these connections, people earn money and spend it, which helps keep the economy balanced and healthy.