The circular flow of economic activity could be a model showing the essential economic relationships at intervals a market economy. It illustrates the balance between injections and leakages in our economy. Half the model includes injections, and half the model includes leakages. The circular flow model shows wherever cash goes, and what it's changed for. The model includes households, businesses, and governments. We to tend to even have the industry that facilitates the exchange of cash and as we'll see during a minute, helps to profitably flip savings into investment to grow the economy. Within the circular flow of the economy, cash is employed to buy product and services. Product and services flow through the economy in one direction, whereas, cash flows within the other way. The circular flow model shows the balance of economic injections and leakages The factors of production embody land, labor, capital and entrepreneurship. The costs that correspond to those factors of production are rent, wages and profit. Folks in households obtain product and services from businesses in an endeavor to satisfy their unlimited desires, and needs. Households conjointly sell their labor, land, and capital in exchange for financial gain that they used to shop for product and services that companies manufacture. Businesses sell product and services to households, earning revenue and generating profits. Businesses conjointly pay wages, interest and profits to households reciprocally for the utilization of their factors of production. Governments levy taxes on households and businesses to produce sure advantages to everybody. The role of the government within the economic flow model is as follows: the government should give policies that promote the circulation of money, that is, the circulation of cash so wealth is generated through it, because the government will, first, pin money on subsidies this to assist the foremost underprivileged or to market the assembly of some sensible, however, once the government spends cash on subsidies it should generate financial gain from somewhere, from where, through taxes, what things the government buys, the government buys product and services for the economy to figure, like gas for state vehicles to figure, the government should conjointly get hold of public services from the offices wherever officers work public and different services. You'll conjointly inject cash into the economy by lowering taxes and generating leaks once, for instance, there are protests and you need to pay more cash on public order. FREE 500 word essay on CIRCULAR FLOW