Assumption of circular flow of income??

The circular flow of income and expenditure refers to the process whereby the national income and expenditure of an economy flow in a circular manner continuously through time.
The various components of national income and expenditure such as saving, investment, taxation, government expenditure, exports, imports, etc. are shown in the form of currents and cross-currents in such a manner that national income equals national expenditure.
Assumptions of the Model:
The circular flow model in a two-sector economy is based on the following assumptions.
1. The economy consists of only two sectors namely, the households and the firms.
2. It is assumed that there is no government sector in the economy, so no taxes and transfer payments.
3. The economy considered is a closed economy i.e. it is assumed that there is no foreign sector. In other words, there is no external trade in the form of imports and exports.
4. The households spend the entire income received on the goods and services. In other words, it is assumed that there is no saving in the economy.