Answer to Question #81245 in Macroeconomics for raeesa

Question

A circular flow diagram represents how goods, services, and more money move through our economy. In terms of this statement, fully discuss the macroeconomic circular flow diagram. Use a single illustration to motivate your answer

Answer 1

A simple illustration to explain the answer is when households supply land that can be used to produce goods or to offer services such as labor. In addition, household provides capital that may be used to finance and invest more in order to create products that are consumed.
The three forms i.e capital,land and labor are essential to firms since they are used to making products that households require and consuming them.