Answer to Question #220474 in Macroeconomics for Rushil

Question

“The circular flow of income is an economic model which exhibits the foundation
of the transactions that build an economy.”— Discuss the statement and show
how this model works in a three-sector economy

Answer 1

The circular flow of income is an important topic in economics since it describes the transactions that make up an economy. The two-sector economy model is based on the basic model of the circular flow of income, which considers only two sectors: enterprises and households.