![]() The money moves through society in an endless circular flow. The workers who receive the wages are also the consumers who use that money to buy those products or services. The firm then gives the money to their employees and workers in wages. ![]() The circular flow model depicts how the firms make money by selling produced goods and services. There are two main elements of a circular flow, the household, also known as the consumers, and the firms, also known as the producers. To explain this complex flow of money, we use simple and easy-to-understand circular flow diagrams. In society, money flows from consumers to producers and flows back from producers to consumers in a circle through lots of complex processes. A circular flow diagram illustrates how money moves in a circular motion and creates an economy.
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