Final answer:
The concept of a circular flow of income is a fundamental idea in economics that illustrates how money and resources circulate in an economy through exchanges between households and firms.
Step-by-step explanation:
The concept of a circular flow of income is a fundamental idea in economics. It illustrates how money and resources circulate in an economy through exchanges between households and firms. In this model, households provide labor to firms in exchange for wages, and then use those wages to purchase goods and services from the firms. This continuous flow of income keeps the economy functioning.