In the circular flow model with the government sector, taxes

Question

Quizplus · Accepted Answer

Taxes flow in the opposite direction to transfers, as they are a leakage from the circular flow of income and expenditure, while transfers are an injection. Taxes are taken from households and firms by the government and are part of the government's revenue. Transfers, on the other hand, are payments made by the government to households and firms and are part of the government's expenditure.

In the Circular Flow Model with the Government Sector, Taxes