Wize University Macroeconomics Textbook > Measuring a Nation's Income
Circular Flow Diagram
Popular Courses
ECON 203
Concordia University
ECON 203
Concordia University
Macroeconomics
University Study Guides
AP Macroeconomics Exam Prep Course
AP Exam Prep
ECON 1022
Western University
Macroeconomics
General Course
ECON 102
University of British Columbia
ECON 1100
University of Guelph
Macroeconomics
University Study Guides
ECON 203
University of Calgary
ECON 102
University of Alberta
ECO102H1
University of Toronto
ECO 1102
University of Ottawa
ECON 209
McGill University
ECON 1BB3
McMaster University
COMM 171
Queen's University
ECON 112
Queen's University
ECON 1010
York University
ECON 295
McGill University
ECON 110B
Queen's University
0:00 / 0:00
Circular Flow Diagram
The circular flow diagram shows us the flow of money and services between households and businesses.
- Households - these are consumers that buy output from firms. They also provide labor for the firms which is why they are called factors of production in the factor market.
- Businesses - these are firms that produce output for households to buy in the goods market. They also buy/hire factors of production (like labor and machines) in the factor market.
Practice: Circular Flow Diagram Practice Question
The circular flow diagram shows that: