After studying this topic, you should be able to understand
- In a two sector economy, the sum total of the factor incomes earned by the households is equal to the total of the expenditures by the households on the goods and services.
- There exist withdrawals and injections, which prevent the circular flow of income and money from remaining constant.
- The main source of revenue for the government is through taxes.
- The government may follow a balanced, deficit or a surplus budget.
- A flow of income may exist between the government sector and the capital market.
- The import and export of goods and services influence the circular flow of income.
- In general, the exports of a country are rarely equal to the ...