A simple model of the workings of an economy depicting the movement of resources between producers and consumers. A number of flows comprise the circular flow of income. First, there are the wages and salaries paid by firms to households. Secondly, there is the money spent by households and received by firms. Corresponding to each of these flows of cash is a flow of some resource in return - labour is provided by households to …showed first 75 words of 979 total…

…showed last 75 words of 979 total…eg income tax) and indirect (eg VAT)  International trade (X-M) means money is spent on foreign made goods and services brought into the country ie imports (M)  These withdrawals or leakages out of the circular flow of income will be counterbalanced by flows back in. These flows are known  Final government expenditure on goods and services eg roads and education (G)  Expenditure by overseas residents on domestically made goods and services ie export expenditure (X).