An economist is creating a basic diagram to illustrate the fundamental flow of money and goods between households and firms. The economist deliberately chooses to exclude institutions like banks and stock markets from this initial diagram. What is the most compelling justification for this omission from a modeling perspective?

Limitations of Simplified Economic Diagrams

Evaluating Simplified Economic Representations

For an economic model to be considered valid and useful, it must always include a representation of financial markets.

Analyzing the Scope of a Simplified Economic Model