As a topic of mathematics, "arrangements", systems of hyperplanes, circles, and general (regular) submanifolds, attract us strongly. We present a natural elementary study of arrangements of circles. It is also a kind of new studies. Our study is closely related to geometry and singularity theory of Morse(-Bott) functions. Regions surrounded by circles are regarded as images of real algebraic maps and composing them with projections gives Morse-Bott functions: this observation is natural, and surprisingly, recently presented first, by the author. We present a systematic way of constructing such arrangements by choosing small circles centered at existing circles inductively. We are interested in graphs the regions surrounded by the circles naturally collapse. We have studied local changes of the graphs in adding these circles. These graphs are essentially so-called {\it Reeb graphs} of the previous Morse-Bott functions: they are spaces of all components of preimages of single points for the functions.