The Circular Flow of Income & The Multiplier Effect

  • Created by: Cara Li
  • Created on: 30-03-15 14:07

The circular flow of income

There are 2 sectors in the model of circular flow of income, which are households and firms. Between these 2 sectors are the flows: income, products and factor services

- Income that is not spent on domestic output is said to leak out of the circular flow. There are three leakages: taxes (T), saving (S) and spending on imports (M). Leakages


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