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Describe the circular flow of income.

      

Describe the circular flow of income.

  

Answers


Kavungya
The circular flow model describes the flow of resources, products and incomes among economic actors.
For simplicity, consider an economy with only two actors; households and firms.
They interact in a circular pattern as in the diagram below:
fig1108918.png
The households
- Supply resources (land, labour, capital and entrepreneurial skills) to the resource markets and receive earnings for those resources.
- Demand goods and services from the product markets. make payments for those goods and services using the incomes they receive.

The firms
- Demand resources from the resource markets for production of goods and services.
- supply goods and services to the product markets.

Products and resources flow in a counter clockwise direction while payments for these items flow in the opposite direction.
Kavungya answered the question on August 10, 2021 at 06:20


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