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Starting with household, they purchase services or goods from firms using the

income they received from firms from their wages and dividends interest. Some savings
from the household will be stored in financial markets. A portion of their income from
firms will also be paid as taxes to the government.
For firms, they pay households their wages and receive income from the sales.
Some of the income will be used to pay taxes to the government. These firms will also
be able to spend money on expenditures for their company to expand. They can also
borrow money from financial markets.
The government is responsible for receiving taxes and can borrow money from
different sources such as the financial market. The financial market lastly can receive
savings from households for stored money and can opt to lend out their money to firms
and the government.

WAGES, DIVIDENDS INTEREST

FIRMS HOSUEHODS
PURCHASES

T
L

P S
A
E
N

U A
X
D

R
I

E V
A
N

C
X
G

S I
E

H ST
S

E N
A T ER G
S S IN
I END S
D
I VI
N ,D
G ES
AG
W

LENDING FINANCIAL
GOVERNMENT
MARKETS

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