A circular flow of funds connect the three sectors of the economy via four types of markets After paying taxes to the government and receiving government transfers, firms allocate the disposable income to private savings and consumer spending Funds flow from household to firms in the form of wages, profits, interest and rent through the factor markets GDP is the value of the final goods and services produced in the economy. Exports must be included Exports to the rest of the world generate a fow of funds into the economy Private savings are equal to disposable income minus consumer spending.