Question

Circular flow of income in three sector economy

Answer 1

Circular Income Flow in a Two Sector Economy:

Real flows of resources, goods and services have been shown in Fig. 6.1. In the upper loop of this figure, the resources such as land, capital and entrepreneurial ability flow from households to business firms as indicated by the arrow mark.

In opposite direction to this, money flows from business firms to the households as factor payments such as wages, rent, interest and profits.

Answer 2

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