Circular Flow Model | Definition & Examples

In the circular flow diagram, what are the roles of households? Of firms? What are the connections between households and firms? | Numerade

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Based on this model, households earn income when firms purchase in factor markets. The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow inner set of arrows (shown in red) shows the corresponding flow of inp