n you own words, explain the circular flow of money in a free market economy. Include the terms resource market, product market, business, government, and households.
Answers
Answer:
The economy can be thought of as two cycles moving in opposite directions. In one direction, we see goods and services flowing from individuals to businesses and back again. This represents the idea that, as laborers, we go to work to make things or provide services that people want.
In the opposite direction, we see money flowing from businesses to households and back again. This represents the income we generate from the work we do, which we use to pay for the things we want.
Both of these cycles are necessary to make the economy work. When we buy things, we pay money for them. When we go to work, we make things in exchange for money.
The circular flow model of the economy distills the idea outlined above and shows the flow of money and goods and services in a capitalist economy.
Explanation:
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Answer:
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. ... Households purchase goods and services, which businesses provide through the product market.