Which type of transaction refers to a flow of money through the economy?

This is the type of transaction where money is used to purchase goods and services in the product market.

It is also circular flow of income. It is a neoclassical model portraying how money circulates through the economy.

Further Explanation

This is an economic that is made up of the households and firm. In the form of wages, money flows to workers and money flows back to companies in return for product.

For a better explanation, in a situation where an individual work to earn a living, the money earned will be used to purchase other important needs, such needs could be food, clothe, rent, entertainment services and so on. The income that is earned by such individuals still flows back to business continuously in a cycle called circular flow of income.

Businesses provide services to consumers, and to increase their sales and profit, these businesses make use of three important things which are labor, capital and land.

These important things are used to run their operations and effectively develop their businesses. The hired labor workings for such companies are rewarded with wages or income for the services they rendered. However, the income received by the labor is used by household to purchase services produced by these businesses. The businesses or companies would also use the money gotten from sales to produce more products and pay their workers.

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