Circular flow of income in two three and four sector economies
The circular flow of income illustrates the movement of money between different sectors of an economy. In a two-sector economy, comprised of households and firms, households spend their entire income on consumption, and any savings represent a leakage.
Circular flow of income in two three and four sector economies
Circular flow of Income in a Four - sector Economy
leakage equal injection equation : I t G t X = S t T tM
Y = C t I t G t X - M
For exports,country receives payment from abroad .While imports are payment made for purchase the goods and service to foreigners.So,import is a leakage.
There is now export and import
Circular flow of Income in a Three - sector Economy