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Circular Flow of Income Model

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Incorporates two types of decision makers. So in a three-sector model there are two injections I and G and two leakages S and T. Pin Op Circular Flow Of Income Circular flow Diagram is a visual model of the economy that shows how dollars flows through markets among households and firms. . Government injects income back into the economy by spending G on public and merit goods like defence and policing education and healthcare and also on support for the poor and. However the basic model of the circular flow of income considers only two sectors the firms and the households which is why it is called a two-sector economy model. This circular flow of income also shows the three different ways that National Income is calculated. The circular flow of income can be explained as a functional economic model which represents how money flows through the different sectors in an economy. But the actual economy is an open one where forei...
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