Answer:
Step-by-step explanation:
The circular flow diagram is a visual representation of how money and goods flow through the economy. It shows the interrelationship between households, businesses, and the government.
In the diagram, households are on one side and businesses are on the other. Households provide labor and other resources to businesses in exchange for wages and salaries. Businesses use these resources to produce goods and services that are sold to households. The government also plays a role in the economy by collecting taxes from households and businesses and spending money on goods and services.
The diagram is circular because money flows from households to businesses when they purchase goods and services. Businesses then use this money to pay for resources such as labor, which flows back to households in the form of wages and salaries. The government also collects taxes from households and businesses, which it then uses to pay for goods and services .
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