Economic circulation diagram

An economic circulation diagram is a way of describing a country's economy. An economic circulation diagram includes households, businesses, banks, the public sector and abroad countries.

Companies create the output, the gross domestic product. Companies use labor from households that receive income for their work. Households consume products from companies using their income. The economic circulation also includes banks, the public sector and abroad countries.

Households can save money in the banks, they have to pay taxes to the government and they import products from abroad countries. Companies can borrow money for investments from banks, sell products to the public sector and sell products abroad.