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Which one of the following is included in circular flow?
Real Flow
Money Flow
Both (a) and (b)
None of these
- Real Flow: This refers to the physical exchange of goods and services between households, businesses, and government.
- Money Flow: This involves the transfer of money, such as payment for goods and services, wages, rent, and dividends, circulating within the economy.
- Option 3 - Both (a) and (b): This option is correct. The circular flow includes both real and money flows. Real flows represent the movement of tangible items, while money flows deal with monetary transactions. They are interconnected in the economic cycle.
- Option 4 - None of these: This is false. Both real and money flows are integral to the circular flow model.
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