Question

Q7. In a circular flow of income,
acts as intermediate between household
and firms to facilitate savings and borrowing,​

Answer 1

⫷ ŤĤẸ ÃŇŜŴẸŘ ⫸

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.

The main function of the firms is to offer goods. In order to do this, firms take the factors (land, labor, and capital) from households and convert products into goods and services that consumers need and want. The role of firms makes up the second part of the circular flow diagram.