Circular Flow of Income in a Closed Economy without Govt. Sector

Closed Economy Without Govt. Sector

The two main bodies that occupy income are households and firms. In a closed economy without government sector these are the only two main components. 

As shown in the figure below the income (C) goes from households when they purchase goods or services to firms who manufacture the goods and services.

If the households dont spent all their income it becomes saved income (S) and in turn later becomes investment (I) when it is later spent to establish new firms.