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The Circular Flow of A Modern Economy
Of course, a modern macro-economy is very complex and a complex flow of money. But, even though it is more complex, it is essentially still a circular flow.
At the right is a diagram of the circular flow of a modern economy. Understanding this diagram will prove very helpful in understanding macro theories and other topics later in the course.
To make sure you understand this diagram we will “build” it up piece-by-piece in this tutorial. Try to pay [particular attention to the names of particular flows, markets, and agents. These names and terms will constitute the language of macro-economics. The better you understand what they mean and where they fit into the structure of the economy, the easier it will be read the textbook, learn the material, and get a better grade.