Unit 1.1 · What Is Economics? Scarcity, Choice, and Economic Models
Circular Flow of Income Model
AO2AO4Diagram required
Syllabus Requirement
Models the interdependence among households, firms, government, the financial sector, and the foreign sector.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
Summary
The circular flow of income model illustrates how economic activity and national income are generated through the interactions of different economic agents, including households, firms, and the government. This model helps to understand the flow of income and expenditure in an economy, highlighting the roles of leakages and injections.