The circular flow of income model demonstrates the important relationships between sectors in the Australian economy. It can also be useful for understanding and explaining current conditions of these sections. It is a useful tool in evaluating the government budget and areas of spending to keep the economy stable. The circular flow of income model is made up of five sectors. These include the household, firms, finance, government, and external sectors. Each of these sectors has a vital and realistic role to play. The household secotr comprises of basic consuming units in society, but it is also t