The Circular-Flow Model
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One of the main basic economic models is the circular-flow model, which describes the flow of money and products throughout the economy in a very simplified way. The model represents all of the actors in an economy as either households or firms (companies), and it divides markets into two categories:
- markets for goods and services
- markets for factors of production (factor markets)
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The Circular-Flow Model (Basic Economic Models):
http://economics.about.com/od/economics-basics/ss/The-Circular-Flow-Model.htm#step6
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