Final answer:
The circular flow model in economics is a diagram that illustrates the flow of money, resources, goods, and services between households, businesses, and markets in an economy.
Step-by-step explanation:
The circular flow model in economics is a diagram that illustrates the flow of money, resources, goods, and services between households, businesses, and markets in an economy. It typically consists of two main sectors: households and firms, with arrows indicating the flow of money and resources between them.
Households provide the factor of production, such as labor, land, and capital, to the firms, while firms produce goods and services that are consumed by households. In return, households receive income and spend it on goods and services produced by firms.
Overall, the circular flow model showcases how economic activity is interconnected and how money circulates within an economy.