ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -For working at the diner, for example, your income would be wages paid in the form of a paycheck at the end of the month. So, in the market for resources, households sell resources and businesses buy resources. The resources flow one way (counter-clockwise) and money flows the other (clockwise).

Detailed explanation-2: -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-3: -The factor market is the market in which the factors of production are bought and sold. It is through this market that households supply businesses with the factors of production, in exchange for an income in the form of wages and salaries, interest, rent and profits.

Detailed explanation-4: -Thus, the three-sector model includes (1) households, (2) firms, and (3) government. It excludes the financial sector and the foreign sector. The government sector consists of the economic activities of local, state and federal governments. Flows from households and firms to government are in the form of taxes.