How money changes hands!

In the Circular Flow Model there are 2 groups:Households (the people)Firms (companies and businesses)

Households need goods and services so they give their money to the firms.

Firms then give the goods and services to the households.

Household

Firms

Money given to

firms

Goods and

services given to househol

ds

Resources that firms need include labor, capital and land.

These are supplied by the households in exchange for their salary or wages!

Household

FirmsMoney

given to househol

ds

Resources given to firms

Household

Firm

Money given to

firms

Goods and

services given to househol

ds

Money given to househol

ds

Resources given to firms