How Can the Circular Flow Model Be Used to Explain

question 5

Essay

How can the circular flow model be used to explain conceptually why GDP computed by the expenditure approach would be equal to GDP computed by the income approach?

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Definitions:

Exchange Rates

The worth of one currency when converted into another.

Global Companies

Businesses that operate in multiple countries across the world, facing a wide range of economic, cultural, and regulatory environments.

Economic Infrastructure

The underlying physical and organizational structures needed for the operation of a society or economy, including transportation, communication, utilities, and services.

Buying Capacity

The ability of an individual or entity to purchase goods or services, determined by factors such as income, credit availability, and economic conditions.