In chapter 1, we introduced the circular flow model of a capitalist system. Although that overly simplistic model served its purpose, it is now time to sophisticate the model to make it more realistic...In chapter 1, we introduced the circular flow model of a capitalist system. Although that overly simplistic model served its purpose, it is now time to sophisticate the model to make it more realistic and give it more explanatory power. That model only included the consumer and business sectors of the economy. In this chapter, we flesh out the circular flow model to include the government sector, the foreign sector and the financial sector.
