Alan Hochstein

The objective of this paper is to link the standard simple circular flow diagram shown at the very start of introductory textbooks with the IS curve that is a more complicated economic diagram showing the essentially same information.

The IS curve can be adjusted to incorporate the government sector as well as the foreign sector and the circular flow diagram can similarly be adjusted.  This paper incorporates the additional sectors into both the IS curve and the circular flow diagram.

The pedagogical benefits of the circular flow diagram over the IS curve are explained.