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Explain in detail the complex circular flow of income model (AS Economics) The circular flow of income model shows linkages between the main sectors in our economy. The basic circular flow of income model is made of of two key sectors, households and firms. Households provide 'factor services' to firms, and firms provide 'factor income' to households. Factor services include labour, enterprise, land and capital. In return for these factor services, households receive factor income, which therefore are wages (for labour), profits (for enterprise), rent (for land) and interest (for capital). When households receive this income as a reward for their factor services, they use it to buy the goods and services from the firms. This is called expenditure. This model is a simplistic version, as it assumes all households income is spent on goods or services. It doesn't take into account the economic affects of the government, the finance sector and the...

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