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Flags are used to indicate the status of various things, usually following some kind of operation. For instance, the ZERO flag indicates the result is zero, the CARRY flag indicates the operation results in a carry, the NEGATIVE flag indicates the result is negative, etc.

Flags can be used in loop control. For instance you can decrement a counter at the end of a loop, and jump conditionally to the top of the loop if the counter is non zero.

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