The circular flow in the economy

Economic growth increases state capacity and the supply of public goods. When economies
grow, states can tax that revenue and gain the capacity and resources needed to provide the
public goods and services that their citizens need,
The circular flow model demonstrates how money moves from producers to households and
back again in an endless loop. In an economy, money moves from producers to workers as wages
and then back from workers to producers as workers spend money on products and services.
Increase in the production of goods and services will also determine the level of investment.
Given the quantity of goods and services, a part of it is consumed, which satisfies the human
wants. Whatever is not consumed is used for further production and it results in capital formation
in the economy.
Almost all countries are somewhere between the extremes of a command economy and a
completely free market economy.That's because mixed economies seem best at handling the
circular flow of goods, money, and resources.
Economists have developed models to help us learn and understand how the economy
functions. One of the most useful is the circular flow model. The circular flow model highlights
the “flows” within the economy the flow of economic resources, goods and services, and the
flow of money.