Question

state the 2 basic principles of circular flow of income and product​

Answer 1

The circular flow of income involves two basic principles:

:(i) In any exchange process, the seller (or producer) receives the same amount which the buyer (or consumer) spends.

(ii) Goods and services flow in one direction and the money payment to acquire them, flow in the return direction giving rise to a circular flow. Thus, product flow from the seller to the buyer is necessarily a complement of money (income) flow from the buyer to the seller.