The circular flow of dollars refers to the continuous movement of money within an economy, as it flows from households to firms for goods and services, and then back again as income in the form of wages, profits, and rent.
Related terms
Income approach: This is one method used to measure a country's GDP by adding up all the incomes earned by households and firms.
Consumption expenditure: Refers to the total amount spent on goods and services by households.
Investment expenditure: Represents the spending done by businesses on capital goods like machinery or buildings.