The U.S. capitalist system relies on a theoretical model, the circular flow model, with three basic elements interacting together to ensure that our needs and wants are provided. The three sectors are (a) consumer, (b) business, and (c) government. The circular flow model shows us that input from each sector spurs on production, and thus goods and services are created. Become familiar with the circular flow model it is primary to your understanding of the US economy cycle.

Compare and contrast the circular flow model and a simple flow model. Address what happens to price and quantity in changes in demand and supply. Be succinct, detailed, and clear in the explanation of what will happen to changes in the circular flow model?