Magazine article Teaching Business & Economics

The Circular Flow of Income

Magazine article Teaching Business & Economics

The Circular Flow of Income

Article excerpt

The circular flow of income appears on most Economic syllabuses and will generally be covered before the deeper intricacies of broader macro-economic policy are approached. For many years I simply developed the circular flow model on a board hoping to impress the class with my undeniable logic. This could be done quite quickly. However, I never really felt that the class became involved with the topic as they were placed in the role of receivers and were not encouraged to think.

The following lesson proposal offers an alternative approach. It is best undertaken before the class has had any teaching about national income and is an ideal and simple introductory lesson to this topic.


1. To introduce the terms associated with the circular flow of income.

2. To generate group discussion and a questioning approach about the relationships between different institutions and activities.

3. To improve presentational and communication skills.

4. To develop and understanding of the way in which activities are linked within an economy.


Equipment needed:

1. Enough Al (flip chart) paper so that groups of three will have one piece each.

2. Each group should have a felt pen and a tube of adhesive.

3. Blue or white tack for displaying the final efforts of each group on the wall.

4. Each group issued with a batch of terms in random order, each term on a separate piece of paper.


1. The class is divided into mixed ability groups of three.

2. Groups are issued with the equipment and terms

3. Groups have to then place the terms on a sheet of paper so that any links between the terms are shown by arrows. The nature of the link is written onto the chart along the arrow. (It is good advice to tell groups to place the terms in the right place before they are stuck onto the sheet. …

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