The basic economics circular flow is a model that illustrates how money, goods, and services move between different sectors in an economy. It is also used to measure the national income or GDP of a country. Here is an essay that explains the concept in more detail:
The circular flow model is one of the most basic concepts in macroeconomics. It shows how money and economic resources flow in cycles between different agents in an economic system. The model can be simplified or expanded to include different sectors, such as households, businesses, government, foreign, and financial sectors. The model helps us understand how the economy works and how the national income or GDP is calculated.
The simplest version of the circular flow model is the two-sector model, which consists of only households and businesses. In this model, households provide labor and other factors of production to businesses in exchange for income, such as wages, rent, interest, and profit. This is the flow of money in the factor market. Businesses use the factors of production
Basic Economics Circular Flow Diagram image
