Answer to Question #179777 in Microeconomics for Nelukalo

Question

Explaine wirh the aid of a figure circular flow of income and spending

Answer 1

The Circular flow of income can be better understood with help of following diagram:

Incomes are first generated in production units due to the joint efforts of factor owners from household. These incomes are distributed to the factor owner who in turn spend the income on purchasing goods and services produced in production units. This makes the circular flow of income complete.