Explaining the circular flow model
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Last updated 7:37 PM on 5/14/25
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4 Terms
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suammary
Households earn income by selling their factors of production to firms and use it to purchase goods and services produced by the firms, which use up these resources.
2
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Financial sector
Not all income is spent; some is saved; the financial sector lends income saved to businesses to invest
3
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Government sector
Some income is taken out of the flow as tax, but the government also spends which injects income into the flow
4
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Foreign sector
Some income flows out to other countries when imports are purchased; exports add to the flow of income because income comes in form outside the economy
Note 
Flashcards (20)