What is the circular flow of economic activity a model of?

Question

Quizplus · Accepted Answer

The circular flow of economic activity is a model that depicts the movement of goods, services, and payments between households and firms. It shows how income earned by households from firms is used to purchase goods and services, and how firms use the revenue generated from selling goods and services to pay for factors of production (such as labor) from households. This circular flow of income and spending is an essential part of a market economy.

What Is the Circular Flow of Economic Activity a Model