Explain the Five Rules for Drawing Integrated REA Diagrams

question 62

Essay

Explain the five rules for drawing integrated REA diagrams.

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Definitions:

Circular Flow Model

An economic model illustrating the continuous flow of money, resources, and goods among households and businesses in an economy.

Value Added

The increase in worth of a product or service as a result of a particular process, typically measured as the difference between the market price and the production cost.

Final Sales

The total value of all goods and services sold for final use, excluding intermediary transactions and unsold inventory.

Leakage

In economics, the term refers to a situation where income or resources exit an economy or system rather than being retained or reinvested.