In The Circular Flow Diagram

In The Circular Flow Diagram. The circular flow diagram displays the relationship of resources and money between firms and households. Learn about circular flow diagram with free interactive flashcards.

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The circle has throughout history played an important role. In the above model, we can see that the firms and the households interact with each other in both product market as well as factor of production market. The circular flow shows how national income or Gross Domestic Product is calculated.

The 'rent, wages, profit and income' branch The diagram above has taken the first circular flow diagram a step further.

The circular flow diagram displays the relationship of resources and money between firms and households.

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Give three examples of goods that your household purchased last year that would not be counted in GDP. The circle has throughout history played an important role. In the opposite direction, we see money flowing from businesses to households and back again.

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