The circular flow model demonstrates how money moves endlessly from producers to households, then back from households to producers. It factors into a country’s gross domestic product (GDP).

Leakage is usually used in relation to a particular depiction of the flow of income within a system, referred to as the circular flow of income and expenditure, in the Keynesian model of economics.

This post, however, presents another circular flow model based on capital and labor. (It is a closed economy with no government for simplification.) There are 4 pools within this circular flow ...