National Income and Circular Flow of Income

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  • Q1

    Distinguish between real flows and money flows.

    Marks:2
    Answer:

    Real flow consists of flow of commodities (goods and services) and factor services among different sectors of the economy.

    Money flow consists of flow of factor income and money expenditure on goods and services.

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  • Q2

    What is meant by injection? Name any two items of injection.

    Marks:2
    Answer:

    The amount of money which is added to the flow of income is called an injection. Exports and subsidies are examples of injection.

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  • Q3

    Define product markets.

    Marks:1
    Answer:

    Products markets or goods markets are those markets where goods and services are bought and sold.

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  • Q4

    Give two examples of leakages.

    Marks:1
    Answer:

    Two examples of leakages are:
    1. Savings
    2. Imports

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  • Q5

    Define national income.

    Marks:1
    Answer:

    National income is defined as the monetary value of all final goods and services produced by the normal residents of a country, whether operating within the domestic territory of the country or outside in a current year.

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