Circular Flow of Income. How the different components of an economy interact.

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This content is about macroeconomics and how the circular flow of income works. It explains how money flows between firms, households, banks, government and foreign countries. It also explains how Gross Domestic Product (GDP) is used to measure the size of an economy. It highlights that injections such as investments, government spending and export earnings are money flowing into the system, while leakages such as savings, taxes and import spending are money flowing out of the system. Lastly, it explains why final goods and services are used to measure GDP.