The Circular Flow – A More Detailed Version Homework Help

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Understanding a little about branch of economics –
Macroeconomics is a branch of economics that deals with every detail of behavior that are there in any market, which has a direct impact on overall production and distribution. This will be a determinant factor for all changes in the market.

  • Circular Flow –

By the very term, we would mean all income flow or flow related to services and goods in all diverse segment of an economy in a circular motion or precise form. There are two divisions for the aforesaid model structure namely:

  • Real or Product Flow: This consists of two sub-divisions as under;
  1. Factor Flow: Flow of all services of factors.
  2. Goods or Product Flow: It is a flow of services and goods.


  • Monetary or Income Flow: Here we will see that factor flow will create money flow in form of payments and turn into flow of income. This is further subdivided in two forms;
  1. Household sector: They are practically owners of production factor, receive income and consumes all kind of services and goods too.
  2. Firm Sector: Hire production factor from household sector, producer of services and sell it back to households and receive incomes.

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