3/10/2024 0 Comments Circular flow diagramPayment for entrepreneurial talent is called profit. That is because physical capital is often financed through loans requiring interest payments. Payments for capital are referred to as interest. The payments for land are generally called rent payments for labor are called wages. Households exchange resources for monetary payments. Those resources include land, labor, capital, and entrepreneurship. Households are the owners of resources in the circular flow model. More detailed circular flow diagrams include the government, foreign markets, banking systems, etc., but that is more detail than you generally need to know for an introductory course. In the simplified circular flow diagram, there are just two economics actors: businesses and households.
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