5/2/2023 0 Comments Circular flow diagram![]() Companies manufacture goods and provide services to their consumers. The exchange of money between firms and workers is known as a circular flow of income in an economy. ![]() People go to work to earn money and that earned money is used to buy various goods and services from various businesses like clothes, food, basic commodities, rent, health & wellness products, entertainment services etc. An economy is made up of numerous circular flows of income. ![]() At simplest level circular flow of money contains two elements such as income workers get money (or money flows to workers) in the form of wages or salaries and money flows back to the firm in exchange of products produced by it. Circular Flow in Economics means the circular flow of money and spending in the economy.
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