Question

Explain how income is flow and how the flow of income is circular

Answer 1

Answer:

The factor owners spend this income on goods which leads to a circular flow of income. ... Households spend all of their income (Y) on goods and services or consumption (C). There is no saving (S). All output (O) produced by firms is purchased by households through their expenditure (E).

The circular flow of income is a neoclassical economic model depicting how money flows through the economy. In its simplest version, the economy is modeled as consisting only of households and firms. Money flows to workers in the form of wages and money flows back to firms in exchange for products.

Answer 2

Income is flow and how the flow of income is circular

• A model of the economy known as the circular flow of income or flow is one in which the main transactions between economic agents are shown as flows of money, products, and services, etc. In a closed circuit, the flows of money and goods are equivalent in value but move in the opposite direction.

Taxes (T): Public Sector Expenditures (G)

(M) Imports: (Exports) (X)

LEAKAGES: INJECTIONS

Saving (S)

• The circular flow model is an economic framework that illustrates the flow of resources, goods, and services throughout an economy. The concept, also known as the circular flow of revenue, tracks the money flows between the sectors in order to calculate a nation's national income or GDP.

• The mechanism by which the national income and spending of an economy flow in a circular fashion constantly through time is referred to as the circular flow of income and expenditure. the numerous elements that make up national income and outlays, including saving, investing, taxation, spending on the government, exports, imports, etc.

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