BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -The circular flow model demonstrates how money moves from producers to households and back again in an endless loop. In an economy, money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.

Detailed explanation-2: -Knowledge of interdependence: The circular flow model underpins the knowledge of interdependence between sectors in an economic system. The activities and money flows cannot take place without interaction with another sector.

Detailed explanation-3: -The circular flow model highlights the “flows” within the economy-the flow of economic resources, goods and services, and the flow of money.

Detailed explanation-4: -The circular flow model shows how money helps to transform the factors of production into goods and services that are then traded to consumers in exchange for even more money. This money allows firms to continue to produce these goods and services and to also increase its output and ability to make a profit.

Detailed explanation-5: -The size of an economy is typically measured by the total production of goods and services in the economy, which is called gross domestic product (GDP). The different sectors within the economy are linked together. This interdependence means that a change in one sector can affect the rest.