Is national income a flow concept or a stock concept ..give reasons
Answers
Answer:
flow concept
explaination
National income is a flow concept because it is measured over a period of time (length of time).
It is circular in nature because it moves in a circle coming back to the starting point. Again it is circular because it has neither beginning nor end. How? Suppose, in an economy, there are two sectors, namely .Household Sector and Firm Sector.
The firms hire/purchase factor services from households and produce goods and services. The households as owners of factors of production (land, labour, capital and enterprise) receive the payment in terms of money (rent, wages. Interest and profit) as reward for rendering production services
Thus, income is generated. The recipients of these incomes (i.e., factor owners or households) in turn spend their incomes on purchase of goods and services (produced by firms) to satisfy their wants. Expenditure by households implies income going back to firms (producers of goods and services).
This makes the circular flow of income complete. In