In the circular flow diagram,

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In the circular flow diagram, households provide resources (such as labor, capital, and natural resources) to firms, and in exchange, households receive income. Firms use these resources to produce goods and services, which they then sell to households. This generates revenue for the firms, which they use to pay for the resources they used in production (such as wages, rent, and interest payments). Thus, households receive income, firms buy resources, and both parties engage in trade in the economy.

In the Circular Flow Diagram