Question

13. Why are money flows opposite to real flows?

14. State the significance of circular flow model.
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Answer 1

Answer:

ans 13. Because money flow are in response to the real flows. So that money flows from the households to producers in terms of consumption expenditure. ... Likewise there is a real flow of factor services from the households to the producers.

ans 14 The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products. In short, an economy is an endless circular flow of money. That is the basic form of the model, but actual money flows are more complicated.