See the below image for the Economics circular flow model diagram. The circular flow model is an economic model that shows the flow of money through the economy. The most common form of this model shows the circular flow of income between the household sector and the business sector. Between the two are the product market and the resource market.
The flows of money between the sectors are also tracked to measure a country’s national income or GDP , so the model is also known as the circular flow of income. The circular flow model, also known as the circular flow of income, describes how money and economic resources flow in cycles between different sectors in an economic system.
The circular process begins with the flow of economic resources from households to firms to produce and flow of money to households in the form of factor income and again money flows from households to firms as consumption expenditure made by the households. There are only two sectors in the economy: the household sector and the business sector.
Economics circular flow model image
