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The circular flow of income model (2)

In a centrally planned economy, where the government takes direct responsibility for planning, producing and distributing goods and services to the population, what will the circular flow look? Think about this, then click CENTRALLY PLANNED to see how our answer matches with yours.

Yes, this is an example of a 2-sector economy. The government is the same as firms, since all firms are owned by the government (state). However, the economy may still be open or closed.

Look again at the circular flow model for a three-sector economy.


Figure 5 Circular flow: A 3 sector, open economy