The underlying principle of the circular-flow diagram is that the flows of money into each sector or market in the economy are equal to those coming out of the sector or market.

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The circular-flow diagram assumes that the flows of money in the economy are continuous and that the total amount of money coming into a sector or market is equal to the amount of money flowing out of it. This principle illustrates how the economy is interdependent and interconnected, and how changes in one sector can affect other sectors.

The Underlying Principle of the Circular-Flow Diagram Is That the Flows