Circular flow of dollars
Definition
The circular flow of dollars refers to the continuous movement of money within an economy, as it flows from households to firms for goods and services, and then back again as income in the form of wages, profits, and rent.
Related terms
Income approach: This is one method used to measure a country's GDP by adding up all the incomes earned by households and firms.
Consumption expenditure: Refers to the total amount spent on goods and services by households.
Investment expenditure: Represents the spending done by businesses on capital goods like machinery or buildings.
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Practice Questions (1)
How is the circular flow of dollars explained in the balance of payments?
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About Us
About Fiveable
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Privacy Policy
CCPA Privacy Policy
Resources
Cram Mode
AP Score Calculators
Study Guides
Practice Quizzes
Glossary
Cram Events
Merch Shop
Crisis Text Line
Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.