Describing and Explain the open Economy Circular Flow Model

the-circular-flow-and-gdp

Describing and Explain the open Economy Circular Flow Model

Describing and Explain the open Economy Circular Flow Model 432 383 refilwe

Describing and Explain the open Economy Circular Flow Model:

GDP can be represented by the circular flow diagram as a flow of income going in one direction and expenditures on goods, services, and resources going in the opposite direction. In this diagram, households buy goods and services from businesses and businesses buy resources from households.

The circular flow diagram illustrates the equivalence of the income approach and expenditures approach to calculating national income. In this diagram, goods, services, and resources move clockwise, and money (income from the sale of the goods, services, and resources) moves counterclockwise.
Individuals purchase goods and services from businesses, and their expenditures (the money they spend) go to businesses. Firms purchases resources, such as labor from households, and the money they pay for these resources go to households.
Source: https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-the-business-cycle/21/a/the-circular-flow-and-gdp
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