What are the main features of the five sector circular flow model? How is equilibrium achieved and what implications does this have for policy makers?
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The five-sector circular flow model represents an open economy like Australia's, and demonstrates the important relationships between the different sectors in the Australian market economy. It is the last circular flow model because it does not have any assumptions that need to be left out such as governments and trade. The five parts of the model: households, firms, finance, Government and overseas sectors work collectively to form the economy. The inter-relationships between these sectors create market economic conditions that affect every Australian.
The model of the economy demonstrat…
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- What are the main features of the five sector circular flow model? How is equilibrium achieved and what implications does this have for policy makers?
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