Calculate flow of income in a two sector model economy is based on the axiom that one's expenditure is others income do u agree with given statement support your answer with valid reason
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Answer:
The statement is correct.
Explanation:
In a two-sector circular flow model, there are obviously only two-sector, namely, households and businesses.
The households are the owners of factors of production. They provide factor services to the businesses and earn factor incomes in return.
The businesses, on the other hand, use these factors to produce goods and services. The households purchase these goods and services and pay consumption spending to the businesses. In this way, one’s expenditure is the other’s income.
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