- 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…