Circular flow

Circular flow

Representation of economic activity in a given time

Factor market

Resource market

Supply by sellers

Demand by buyers

Households

Sell their Factors of production

Primary participant in circular flow

Goods market

Product marketing

Injections

Investments

Government expenditure

Exports

Leakages

Savings

Taxes

Imports

J>L

National income will expand

J<L

National income will decrease

I-S

Private sector

G-T

Budget balance of public sector

X-M

Trade Balance on current account