explain the circular flow of income
Answers
Answer:
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The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.
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Answer:
The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money.
That is the basic form of the model, but actual money flows are more complicated. Economists have added in more factors to better depict complex modern economies.
These factors are the components of a nation's gross national product (GDP) or national income. For that reason, the model is also referred to as the circular flow of income model.
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