Question

define cicural flow of income​

Answer 1

Answer:

The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.

Answer 2

Answer:

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Circular Flow of Income: The circular flow means the unending flows of production of goods and services, income and expenditure in an economy. It shows the redistribution of income in a circular manner between production unit and households.

Phases of Circular Flow Income

(i) Production of goods and services.

(ii) Generation of income in terms of wages, rent, interest and profit.

(iii) Expenditure in terms of consumption and investment.

Types of Circular Flow of Income

(i) Real flow: The flow of factor services from households to business and flow of goods and services from business to households is known as real flow.

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(ii) Money flow The flow of money across different sectors of the economy is temed as money flow. i.e. exchange of factor services by the household for factor payments from firms.

(iii) Injections: It means introduction of income into the flow when households and firms borrow the savings, they constitute injections.

(iv) Leakages: It refers to the withdrawal from the flow, when households and firms save part of their incomes, it constitutes leakage.