economics

3.2 All market economies are characterized by a circular flow of economic activity. This means that money and products (including the products businesses need to operate) move in a circular fashion between businesses and households. This situation is often illustrated using a diagram that allows us to visualize the basic workings of the overall economy. Applying your knowledge about the circular flow, explain the relationship that exists between the main economic actors in an open economy. [Do not draw the diagram] (25)