Describe the circular Flow Model

Answer 1

The circular flow model is a summary of the operation of a market economy, that is the flow between production factors (firms) and households. Firms provide an income to households though employment (labour) and in the same manor households spend their income on firms for services and products.

Answer 2

The circular flow involves, purchasing resources in a resource market, and using the resources to produce a goods or service, selling the items to others in the output market. The consumer provide labor to firms through the resource market in exchange for money. They in-turn purchase goods and service from firms in the output market.