Question

circular flow diagram:
fill in the missing information below, show all of the exchanges, with arrows showing which way things are exchanged,
between all involved in the circular flow of economic activity. you must label the exchange, for example, if the exchange is
goods and services, you must label the exchange and which way they are exchanged, where they go... (add arrows if needed).

Explanation:

The circular flow model has two core sectors: households and firms, interacting in two markets. The central oval represents the market for factors of production. Households supply factors (labor, capital, land) to firms, while firms pay income (wages, rent, profit) to households. The outer loop is the market for goods and services: firms supply goods/services to households, and households pay consumption expenditure to firms.

Answer:

1. Top rectangle (Market): Market for Goods and Services

• Downward arrow: Goods and Services (from Firms to Households)
• Upward arrow: Consumption Expenditure (from Households to Firms)

1. Right rectangle (Sector): Firms
2. Bottom rectangle (Market): Market for Factors of Production

• Downward arrow: Income (Wages, Rent, Profit; from Firms to Households)
• Upward arrow: Factors of Production (Labor, Capital, Land; from Households to Firms)

1. Left rectangle (Sector): Households
2. Central oval: (Connects the two markets, representing the flow of inputs and outputs between sectors)