Question

What is Circular flow of income?

Options

• The unending flow of production, income, and expenditure between sectors of an economy.

• Total value of final output produced.

• Monetary payments made in exchange for factor services and goods.

• Physical flow of factor services and goods/services between sectors.

Answer 1

Circular flow of income is the unending flow of production, income, and expenditure between sectors of an economy. It continues as production generates income and income leads to expenditure.