Explain The Difference Between Real Flow And Money Flow
Explain Real Flow And Money Flow With The Help Of Diagram
Explain Real Flow And Money Flow Diagram

Modern economy is a money economy. Money is used in the process of exchange and it has removed the difficulties of barter system. As we know money acts as a medium of exchange.

Jan 21, 2021 Basically, there are two types of circular flow of income – Real Flow and Money Flow. The biggest difference between real flow and money flow is that in case of real flow, exchange of goods and services takes place among various sectors of the economy, but when we talk about money flow, the monetary exchange between the two sectors exists. Difference between stock and flow. What are consumers goods. Briefly explain the types of consumer goods. ‘ A good can be final and intermediate good at the time.’ Explain using examples. Define circular flow. Explain circular flow in two sector economy. ‘Against every real flow there is money flow’ explain. Apr 15, 2016 These are called real flows. Likewise, there is a flow of money from the firm to the household sector, in terms of factor payments and there is a flow of money from the household sector to the firm in terms of payments for the consumption of goods and services. These are money flows. Cash flow is the money that is moving (flowing) in and out of your business in a month. Although it does sometimes seem that cash flow only goes one way—out of the business—it does flow both ways. Cash is coming in from customers or clients who are buying your products or services.

In an economy, households supply factors to the firms (producing units). Finns pay for the use of factors. So households receive payments from firms for their services in terms of money.

So in money economy there is a flow of productive resources or factors and there is a flow of money corresponding to the flow of economic resources (or factors) and flow of goods and services produced by economic resources.

Circular Flow of Income in a Two Sector Economy:

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Eventually, the country would produce a $100 trillion Zimbabwean dollar note — which had an of about $30 (U.S.) in January 2009 and $5 in 2011. The government would go on to abandon its entirely, opting instead to adopt the U.S. By 2015, it was worth just 40 cents sources:,. The Zimbabwean government decided to fight fire with fire and printed even more money in higher denominations. How do we determine the real m2 money supply.

As we know resources like land, labour, capital and entrepreneurial ability flow from households to firms, the producing units. Money flows from firms to the households as factor payments in the form of wages, rent, interest, profits. Again income received by households in money terms from the firms again flow from households to firms as consumption expenditure made by the households.

The circular process begins with the flow of economic resources from household to firms to produce and flow of money to households in the form of factor income and again money flows from households to firms as consumption expenditure made by the households.

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From Fig. 2, it is clear that labour, land, capital and entrepreneurial ability flow from households to firms (as indicated by arrow mark). In opposite direction to this, money flows from firms to households as factor payments such as wages, rent, interest and profits.

In the lower part of the figure, money flows from households to firms as consumption expenditure made by the households on the goods and services produced by the firms while the flow of goods and services is in opposite direction from firms to households. We saw that money flows from firms to households as factor payments and then again it flows from households to firm.

So there is a circular flow of income in between two sectors – household sector and firm sector. This circular flow of money will continue indefinitely. In this way the economy functions. But, it is a fact that this flow of money income will not always be same.

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The volume of flow changes. During depression, this volume of flow of money will contract and less and in prosperity it will expand with changes in national income. This circular flow of money is a measure of national income. The flow of money changes with the change of national income. Assumptions of circular flow of income analysis:

Neither the households from their incomes nor the firms from their profits save.

Government does not play any part in the national economy.

There is no export and import of goods and services by the economy. It means we have assumed a closed economy.

Thus, in this analysis we have not taken into account the role of foreign trade, domestic savings and the role of government.

Circular Flow of Income Class 12 MCQ with Answers includes Multiple choice questions, Fill in the blanks, True or False, Short answers type questions. Answers to Circular Flow of Income Class 12 CBSE MCQs are available at the end of the last question.

Circular Flow of Income Class 12 MCQs (Multiple Choice Questions)

1. Which of the following is not a phase of circular flow of income?

a) Production Phase
b) Income phase
c) Expenditure phase
d) Growth phase

2. In closed economy, which sector is not included?

a) Household
b) Local Firms
c) Local Government
d) Rest of the world

3. Which of the following is not a flow concept?

a) Capital
b) Capital Formation
c) Income
d) Depreciation

4. Real flow refers to the flow of

a) Goods and services across different sector of the economy
b) Emotions
c) Factor services from household sector to the producer sector
d) Both A and C

5. Which of the following is a stock concept?

a) Population
b) Wealth
c) Capital
d) All of the above

6. Flow of goods and services in barter economy is called

a) Water flow
b) Real flow
c) Money flow
d) All of the above

7. Real flow is also called

a) Invisible flow
b) Money flow
c) Physical flow
d) Both (a) and (c)

8. Two sectoral economy consists of

a) Household and foreign sector
b) Firms and foreign sector
c) Households and firms
d) Government and firms

9. Which of the following is a factor income?

a) Rent
b) Wages
c) Profit
d) All of the above

10. Money flow depicts the way —- circulates in an economy : –

a) Money
b) Goods
c) Services
d) All of the above

Circular Flow of Income Class 12 MCQ with Answers

11. Which of the following is also called nominal flow?

a) Real flow
b) Money flow
c) Physical flow
d) All of the above

12. Is black money real money. Which of the following is a flow?

a) Aggregate Supply
b) National Income
c) Investment
d) All of the above

13. Saving is an example of

a) Stock
b) Flow
c) Both (a) and (b)
d) None of the above

14. Flow variables are those which

a) Can be measured at a point of time
b) Can be measured over a period of time
c) Cannot be measured
d) None of the above

Explain The Difference Between Real Flow And Money Flow

Explain Real Flow And Money Flow With The Help Of Diagram

Circular Flow of Income Class 12 MCQ with Answers

1. (d) Growth phase
2. (d) Rest of the world
3. (a) Capital
4. (d) Both A and C
5. (d) All of the above
6. (b) Real flow
7. (c) Physical flow
8. (c) Households and firms
9. (d) All of the above
10. (a) Money
11. (b) Money flow
12. (d) All of the above
13. (b) Flow
14. (b) Can