state the 2 basic principles of circular flow of income and product
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It involves two basic principles:
(i) In an exchange process, the seller (producer) receives the same amount which the buyer (or consumer) spends.
(ii) Goods and services flow in one direction and the money payments to acquire them flow in the return direction giving rise to a circular flow
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The circular flow of income and product involves two basic principles: (i) Real flow of income implies the flow of factor services from the households sector to the producing sector. (ii) Flow of income across different sectors always implies the identity between payments and receipts.
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