| Question | 2. What are the different phases of a circular flow of income? |
| Class | Class 12 |
| Subject | Economics (Macroeconomics) |
| Category | Class 12 Economics Solutions Sandeep Garg |
Q.2 What are the different phases of a circular flow of income?
Solution:-
- Production Phase/Generation Phase: In this phase, firms produce goods and services with help of factors of production. For example: production of yarn from cotton in a textile industry with the help of labor and machines
- Income Phase/Distribution Phase: In this phase, factor income is transferred from firms to households. For example: payment of wages to the labors for their factor service.
- Expenditure Phase/Disposition Phase: In this phase, income received is spent on goods and services produced by firms. For example: expenditure by the households to meet the daily requirements.
Short Questions – Sandeep Garg Macroeconomics Class 12 Solutions Circular Flow of Income
- Explain Circular flow of income in two sector economy.
- What are the different phases of a circular flow of income.
- What is meant by circular flow of income? Distinguish between Real flow and Money flow.
- “Households and Firms depend on each other in the circular flow of income. Justify the statement in case of a two-sector model.
- Distinguish between Stock and Flow. Give an example of each.
- Discuss briefly, the circular flow of income in a two sector economy with the help of a suitable diagram.