Designed with EdrawMax, this template is a circular flow diagram of the economy. It illustrates the relationships between "FIRMS", "HOUSEHOLDS", and the "GOVERNMENT" through the "FACTOR MARKET" and "PRODUCT MARKET". Households supply factors of production (land, labor, capital, entrepreneurial ability) to the factor market and receive income. Firms buy these factors and use them to produce goods and services, which are sold in the product market. Households purchase these finished goods. The government is involved by providing public goods and services, collecting corporate and income taxes, and making expenditures. This diagram serves as a visual guide to understand the flow of resources, income, and goods in an economy, useful for studying macroeconomic concepts.
