![]() In a healthy economy, injections must equal leakages to maintain the circular flow. Imports: This refers to purchases of goods and services by households and firms from foreign suppliers, which reduces the flow of goods and services in the domestic economy.Taxes: These are payments made by households and firms to the government, reducing the flow of public goods, services and money in the economy.Saving: This refers to the portion of national income not spent on consumption, which reduces the flow of goods and services in the economy.Related: The Importance Of A Circular Economy Post COVID-19 They facilitate the flow of capital between households, firms, the government and the foreign sector. Financial sector: This sector represents the financial institutions, such as banks and other intermediaries, that are involved in the economy.The foreign sector plays a role in the economy by trading goods, services and capital with the domestic economy. Foreign sector: The foreign sector represents all the actors outside the domestic economy, such as foreign countries, international organizations and international trade.The government provides goods and services to households and firms and collects taxes from households and firms. Government sector: This sector represents the government and all the public institutions involved in the economy. ![]() They use the resources provided by the households to produce the goods and services sold to the households and the government. Firm sector: The firm sector represents all the businesses that produce goods and services in the economy.They provide labor, resources and capital to the firms in exchange for wages, profits and rents. Household sector: This sector represents all the individuals or families that make up the economy.The circular flow model represents the economy and its actors: It shows people earning money by working for businesses and then spending it on the things they need and want from those businesses. The circular flow model is a way to show the flow of money, goods and services in an economy. The applications of the circular flow model. ![]()
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