Answer to Question #151331 in Economics for Shoaib

Question

Draw a diagram and explain "Circular flow of Economy".Explain how an inefficient performance of one element of economy can effect others.

Answer 1

The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money.

An inefficient performance of one element of economy can affect others, because it will cause the inefficiency of all the circular flow of the economy at all.