Households would provide factors of production to firms.
- The circular flow demonstrates the movement of money in the economy.
- The two-sector model of circular flow comprises households and firms.
- Money first flows from producers to households in return for production services in the form of wages.
- Finally, return to producers back in the form of payment for the purchase or expenditure made by households.
What do you mean by circular flow of money?
- The circular flow model demonstrates how money moves through society.
- Money flows from producers to workers as wages and flows back to producers as payment for products.
- In short, an economy is an endless circular flow of money.
What are the two types of circular flow?
There are two types of circular flow:
- Real flow: The term real flow means the flow of factor services from households to firms.
- Similarly, the flow of goods and services from firms to households.
- Money flow: The money flow refers to the flow of factor payments from firms to households for factor services.
Learn more about the circular flow of money here:
brainly.com/question/24114630
#SPJ10
