Definition of circular flow of economic activity in four sector model
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Answer:
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The circular Cash flow of income is a two-way channel of an economy in which there is a link between money, production, and services.
EXPLANATION-
To understand the circular cash flow, we have to look for 3 sectors of the economy that is
- Industrial sector,
- The household sector,
- Government, and
- Banking sector.
The industrial sector is the sector of the society that acquires the raw materials, labor, money, and land from the society and render services, wages or salaries, interest or profit and rent for the acquire resources.
Whereas,
The household sector purchases the goods and services rendered by the industries sector and gets a salary for the amount of service they offer to the industrial sector/ business sector.
The Government is the third sector of the flow that helps to unite all the processes of the housing and industrial sector. The government is that operating body that creates a code of conduct for the proper channelizing of resources and money. To maintain a proper channel government seek different sort of taxes and fees form the household and industrial sector. Also, offers extra benefits like pension, special benefits, etc.
The banking sector deals with money creation and money channelization in the country to maintain a balance in the economy of the country. They provide money related supports and advice to all the sectors to assure the balance in the economy. They lend money in the form of loans, funds or investments as they seek interest and charge fees for the service they lend.
So, this two-way channel is completed by the process of exchange of resources in one or form to create a circular flow which starts with acquiring resources from the society to make the payments of the consumption of goods and services offered.
Conclusion-
Hence, all four sectors work interdependently to full fill the needs to complete the channel of exchange of goods and services through payments made.
Learn more about the circular cash flow - https://brainly.in/question/15894591
