circular flow Flashcards
What is circular flow?
A model that describes the movement of money through the economy between participants.
What is a closed economy?
An economy that does not trade or interact with other economies at all. There are no exports or imports; it is self-sufficient.
Who are the participants in the circular flow of a closed economy?
Households, businesses, the government, the goods and services market, and the factor market.
What characterizes the flow of goods and services, money, and factors of production?
The flows do not happen in isolation; economic activity is happening between households, businesses, and the government all the time.
What is the nature of the flows in a closed economy?
The flows do not stop.
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