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The circular-flow modelThe following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.Markets for Goods and ServicesFirmsHouseholdsMarkets forFactors of ProductionBased on this model, households earn income when purchase in factor markets.2.The circular-flow modelThe following diagram presents a circular-flow model of a simpl
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