Circular Flow of Economy (Elementary)

The circular flow of economy is an economic model that illustrates the movement of money and goods between producers and consumers. It is a simplified representation of the economy that shows how money and goods move between different sectors of the economy. The circular flow of economy is an important concept in economics, as it helps to explain how the economy works and how different economic activities are related.

History of the Term

The concept of the circular flow of economy was first introduced by French economist Jean-Baptiste Say in the early 19th century. Say argued that the economy was a circular flow of money and goods between producers and consumers. He believed that the economy was self-regulating and that the flow of money and goods would eventually reach equilibrium. This idea was later developed by British economist Alfred Marshall in the late 19th century. Marshall argued that the circular flow of economy was a key factor in economic growth and development.

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Summary

The circular flow of economy is an economic model that illustrates the movement of money and goods between producers and consumers. It is a simplified representation of the economy that shows how money and goods move between different sectors of the economy. The circular flow of economy is an important concept in economics, as it helps to explain how the economy works and how different economic activities are related. For more information about the circular flow of economy, visit websites such as Investopedia, The Balance, and Khan Academy.

See Also

• Gross Domestic Product (GDP)
• Inflation
• Unemployment
• Aggregate Demand
• Aggregate Supply
• Monetary Policy
• Fiscal Policy
• Economic Growth
• Business Cycle
• Supply and Demand

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