The circular flow could also be viewed from the opposite direction. Breaking down Circular Flow Diagram. d illustrates how business firms interact with one another. In this way, money flows in a circular manner from the business sector to the household sector and from the household sector to the business sector in the economy. The above diagram shows the circular path of expenditure and income in the economy. This question refers to the circular flow model that shows how all parts of an economy are linked together. Some households may own only a few hundred rand worth of shares, while others may own thousands or millions of rand worth of shares in a company. It also shows how income is spent by households, firms and government. C. firms supply goods and services to households, and households supply factors of production to firms. The circular flow model a shows the flow of output and income within one sector of the economy. The simple circular flow model shows that workers and capital owners offer their services to firms through the... resource markets. The circular flow diagram is an economic model that shows the dealings in an economy through flows around a loop. The circular flow diagram GDP can be represented by the circular flow diagram as a flow of income going in one direction and expenditures on goods, services, and resources going in the opposite direction. 1 000 equal to investments rs. Microeconomics Video Module course note pack: 1.2 How Income Flows - Households & Firms, Professors can easily adopt this content into their course. In the simple circular flow model of an economy, the two basic units of the economy are: a. government and business firms b. corporations and labor unions The model includes households, businesses and governments. Problem 2 Easy Difficulty. Households and businesses are... sellers in the resource and product markets respectively. The circular flow diagram is a basic model used in economics to show how an economy functions. The four flows are flow factors of production from households to firms, flow of incomes from firms to household, flow of output of goods and services from firms to households and lastly flow of expenditures from households to firms. The circular flow model shows how households and firms interact. Answer: The circular flow model is a diagram representing the flow of products and resources between businesses and households in exchange for money payments. The circular flow model shows how households and firms interact in two key markets: the _____ market and the _____ market. b) Explains how goods are produced and When it comes to the flow of money, the households spend money to purchase goods. e shows how businesses sell their resource services to households. Even though businesses own the capital goods (buildings, factories, tools and machines), these businesses are, in turn, owned by households through the shares they have in them. The circular flow model shows where money goes and what it's exchanged for. In one part of the model, businesses sell to households. The circular flow model also shows the two other flows: the flow of products (goods and services) and resources on the outer circle, and the flow of money payments on the inner circle. A simple circular flow model shows the flow of goods and services through the economy. Households are on the selling side of the resource market and on the buying side of the product market. The economy consists of millions of people engaged in many activities—buying, selling, working, hiring, manufacturing, and so on. Get the detailed answer: The circular flow model ( ) a) Illustrates the interdependence of businesses and consumers. Resource; product. The circular flow model illustrates those flows for a simplified economy in which there is no government. The circular flow model is a diagram that shows how the money and capital flow in the economy. Circular flow Diagram is a visual model of the economy that shows how dollars flows through markets among households and firms. This the market that corresponds with the real flow of labour. comparative advantage refers to: This situation is often illustrated using a diagram that allows us to visualize the basic workings of the overall economy. Circular Flow of Economic ActivityWhat It MeansAll market economies are characterized by a circular flow of economic activity. The simple circular flow model shows that. Based on the circular flow model, money flows from businesses to households in a. factor markets. With the real flow of economic ActivityWhat it MeansAll market economies are characterized by circular! 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