ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The circular flow model demonstrates how money moves from producers to households and back again in an endless loop. In an economy, money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.

Detailed explanation-2: -Households are buyers in the market for goods and services. Households exchange income for goods and services. Businesses are sellers in the market for goods and services. Businesses sell goods and services in exchange for money, which in this case is called revenue.

Detailed explanation-3: -Circular Flow of Income in a Two-Sector Economy It is defined as the flow of payments and receipts for goods, services, and factor services between the households and the firm sectors of the economy.

Detailed explanation-4: -The circular flow of income illustrates the links between income and spending in an economy. In its simplest form, revenue earned by firms by selling their output ultimately flows to households, which spend this income on the output produced by firms.

Detailed explanation-5: -Circular flow Diagram is a visual model of the economy that shows how dollars flows through markets among households and firms.