Question

The circular flow model examines interactions between which sectors of the economy?

Answer 1

The interplay between two sets of economic decision-makers—households and businesses—as well as two different categories of economic markets—the market for resources and the market for products and services—is depicted by the circular flow model.

What is circular flow model?

A model of the economy known as the circular flow of income or flow is one in which the main transactions between economic agents are shown as flows of money, products, and services, etc. In a closed circuit, the flows of money and goods are equivalent in value but move in the opposite direction. The interplay between two sets of economic decision-makers—households and businesses—as well as two different categories of economic markets—the market for resources and the market for products and services—is depicted by the circular flow model.

The circular flow diagram's four key components are people, businesses, markets for products and services, and markets for factors of production. These four components provide a framework for comprehending how money moves continuously across an economy.

Hence, The interplay between two sets of economic decision-makers—households and businesses—as well as two different categories of economic markets—the market for resources and the market for products and services—is depicted by the circular flow model.

To learn more about circular flow model refer to:

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