What is the five sector model?

The five sector model, often used in economics, outlines the interactions between different sectors of an economy to understand how they contribute to overall economic activity. It typically includes households, businesses, government, financial institutions, and the foreign sector. This model illustrates the flow of goods, services, and money among these sectors, highlighting the interdependencies and how changes in one sector can impact others. It serves as a framework for analyzing economic performance and policy effects.