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 the source of supply of the specialised labour force which is required by the firms sector. The business sector comprises of basic productive units in the economy, most production of goods and services is in the hands of private firms....

Number Of Pages: 4

Number Of Words: 852

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