The balance on your savings account on a particular day is a stock variable.

The foreign sector is linked to the domestic flow of income and spending through imports and exports.

Government spending is an injection into the circular flow of income.

Taxes are a leakage (or withdrawal) from the circular flow of income and spending.

The major flows associated with the government are government spending and taxes.

Households sell in the factor markets and purchase in the goods markets.

Firms purchase in the factor markets and sell in the goods markets.

There are two sets of markets in the economy: goods markets (for example, the market for tomatoes) and factor markets (for example, the labour market).

Firms are mainly involved in consumption while households are mainly involved in production.

Capital goods are purchased by firms.