The circular flow model examines interactions between which two groups? households and firms households and consumers firms and producers firms and government

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The circular flow model examines interactions between which two groups? Households and Firms. The circular flow describes the flow of money and products throughout the economy (a graphical representation of the movement of money between sectors – households and businesses – and markets – production factors, products, and financial market). The model represents all of the actors in an economy as either households or firms, and it divides markets: Markets for goods/services (households buy finished products from firms that are looking to sell what they make) and Markets for factors of production (households provide labor to firms, they can be thought of as the sellers of their time or work product). The continuous flow of money guarantees the exchange of products and services between consumers and producers, thereby enabling both sectors to pay their taxes to the government.

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