Circular Flow of Income

The Circular Flow of Income Model

simple circular flowThe Circular Flow of Income Model shows the key relationships of income, expenditure and production in the economy.

Expenditure, income and goods and services move through the sectors of the economy because of economic activity.

Because of this is hard to understand, the circular flow model makes these relationships easier to see.

The model is extended with added sectors, leakages and injections of funds. Now see more about this in these question and answer pages.