The circular-Flow Model TThe circular-fow model is a simple way to visually show the economic transactions that occur between households and firms in the economy. Harcourt, Inc. items and derived items copyright o 200l by harcourt, IncHarcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Circular-Flow Model The circular-flow model is a simple way to visually show the economic transactions that occur between households and firms in the economy