Question

Briefly explain the money flow and the real flow of income.

Medium

Solution

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Money flow refers to the flow of money in terms of receipts and payments across different sectors of the economy. Flow of factor payments by producer sector to the household sector or flow of money from household sector to producer sector on account of the purchase of goods and services for consumption are examples of money flows.
Real flow refers to the flow of goods and services across different sectors of the economy. Flow of factor services from household sector to the producer sector or flow of goods and services from producer sector to household sector are examples of real flows.

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