Question

Write short note on:

Circular flow of national income

Answer 1

There is a continuous flow of expenditure and income and that of goods and services in an economy. For example, households receive income from the firms. They, in turn, spend this income on the goods and services produced by the firms. Thus, the expenditure of the households becomes the income of the firms. Such a continuous flow of income and expenditure or the flow of goods and services among different sectors of the economy is called the circular flow of national income.