The circular flow model of economics shows how money moves through an economy in a constant loop from producers to consumers and back again, factoring into a nation’s GDP.

In the study of economics, one learns the circular flow of the economy between firms and households. This post, however, presents another circular flow model based on capital and labor.

Money flow and real flow are the two main aspects of the circular flow of income economic model. Both refer to exchanges of goods and services for money, but the two concepts differ in how they ...