Circular flow

Definition

In the context of Introduction to Business, particularly within the chapter on Understanding Economic Systems and Business, circular flow describes the continuous movement of goods, services, and money between producers (businesses) and consumers (households). It illustrates how these groups interact within an economy, highlighting the interdependencies and exchanges that fuel economic activity.

Related terms

Gross Domestic Product (GDP):

The total value of all goods and services produced within a country's borders in a specific time period; it is often used as an indicator of economic health.

Market Economy:

An economic system where supply and demand from consumers primarily drive production decisions and allocation of resources.

Factor Market: The marketplace where productive resources (like labor, capital) are bought and sold; businesses buy resources they need to produce goods or services