Using a circular flow diagram, outline the five sector circular flow of income model of the Australian economy. Explain how leakages and injections influence the level of economic activity. Examine how the government can influence the level of economic activity in the economy.

The five-sector circular flow of income model describes the operation of the economy and the linkages between the main sectors in the economy.

The Australian economy can be divided into five sectors- individuals, businesses, financial institutions, government, and international trade and financial flows.

The individual sector consists of all individuals in the economy. It is concerned with the activities in earning an income, and spending it on goods and services.

The business sector consists of all the business firms engaged in the production and distribution of goods and services. It concerns all their activities involved with buying factors of production and using them to produce...