Circular Flow Of Income — Chapter Summary

It is the continuous flow

It is the continuous flow of money income and goods and services across different sectors of the economy. It has three phases: production, distributio

A stock is measured at

A stock is measured at a particular point of time and has no time dimension. A flow is measured over a period of time and shows change over time.

Real flow is the physical flow

Real flow is the physical flow of goods and services between households and firms. It usually prevails in traditional economies and involves barter-li

Money flow is the flow

Money flow is the flow of factor payments from firms to households and consumption expenditure from households to firms. It is also called nominal flo

The two

The two-sector model consists of households and firms only. Households supply factor services and receive wages, rent, interest, and profit. They spen