In the circular-flow diagram, one loop represents the flow of goods, services, and factors of production, and the other loop represents the corresponding flow of dollars.

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In the circular-flow diagram, one loop represents the physical flow of goods, services, and factors of production (like labor and capital) between households and firms, while the other loop represents the flow of dollars (payments for those goods, services, and factors) in the opposite direction.

In the Circular-Flow Diagram, One Loop Represents the Flow of Goods