Question

(b) Diagrammatically explain real and money flows between different sectors of an economy.
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Answer 1

Answer:

KEY TAKEAWAYS

Money flows depict the way that money and credit circulate in the economy as income turns into savings and investment and back again.

Real flows depict the way that commodities and products & services are produced and consumed in the economy.

While mainstream economists often discount the relation between real and money flows, many others understand that thetwo are intrinsically linked.

The Circular Flow of Income