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It should be noted that in the circular flow model, the resource markets provide for the exchange of labor, and product markets provide for the exchange of goods and services.
- The circular flow model simply shows how money moves in society. The three main actors in the circular flow of income are the households, firms, and the government.
- For example, in the model, the households give money to businesses after goods are bought. The government also taxes businesses. The businesses pay the people salaries, etc. It just shows how money moves in an economy.
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