What is Circular Flow of Income

What is Circular Flow of Income. The circular flows of income refers to the flow of payments and receipts for factor services and for currently produced output passing between domestic firms and households. In other words, it describes the flow of payment from businesses to households in exchange for labour and other productive services and the return flow of payments from households to businesses in exchange for goods and services.

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How to determine circular flow of income

To make discussion on circular flows of income simple, a two sector economy, which involves households and firms, will be used. The households supply factors of production (input) to firms which need them for production purposes. In return, they are paid wages, interest, rents and profits, which constitute their income. The members of the households use their incomes to purchase goods and services produced by the firms.

 This pattern of consumption expenditure made by households constitutes income for firms. This process leads to the formation of an income flow. The firms again use the income to purchase the productive service of households. Income, therefore, continues to flow in a circular flows of income. While income flows in one direction, goods  and services produced by the firms and the productive services of households flow in the other direction.

FACTORS AFFECTING CIRCULAR FLOW OF INCOME

As seen in the circular flows of income and income determination theory, there are a whole lot of factors that influence the flow of income any nation. So here are a few of the factors that affect the flow of income Circular Flow of Income

How savings influence the circular flow of income: This constitutes part of income which is not consumed immediately. They have the tendency to reduce the expenditure of the households and firms

  • Injection of funds can affect circular income flow: Injection to fund into the circle is an increase in the incomes of (2) households and firms beside their normal processes of selling productive resources and manufactured goods.
  • Taxes: Taxes tend to reduce the volume of fund in circulation as it reduces the expenditure of firms and households.
  •  Withdrawal: Withdrawal tends to reduce the amount of fund in the circular flow of income.
  • Aids and grants: Aids and grants from government or other sources increase

the volume of fund in the circular flow of income.

  •  Import and export: While imports involve expenditure on foreign made (1) goods and services leading to withdrawals from circular flow of (2) income, exports provide funds leading

to injection into the circular flow

  • How  Investment affects income flow: Investments created an (3) additional income, leading to injection

into the circular flow

LIVER FLUKE
162. ECTO PARASITES
163. TICK
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49. FORAGE CROP AND PASTURE

50. FORAGE GRASSES

51. SILAGE

52. PASTURE         

53. TYPES OF PASTURE

COMMON GRASSES AND LEGUMES

54. GRASSES

55. LEGUMES

56. ESTABLISHMENT OF PASTURES

57. 201ECONOMIC REFORM PROGRAMMES IN NIGERIA

58. HAY SILAGE

59. FORESTRY IMPORTANCE OF FORESTRY 206. FOREST MANAGEMENT FOREST REGULATION DEFORESTATION AFFORESTATION

60. DISEASES AND PESTS OF CROPS

61. MAIZE SMUT

62. RICE BLAST

63. MAIZE RUST

68. CASSAVA BACTERIA BLIGHT

69. BLACK ARM BACTERIA BLIGHT OF COTTON

70. TOMATO ROOT KNOT

71. DAMPING-OFF OF TOMATO

72. ONION DOWNY MILDEW

73. STORED PRODUCE MOULD

74. PESTS OF CROPS

75. STEM BORERS

76. ARMY WORM

77. COCOA MIRIDS(CAPSIDS)

78. APHIDS

79. WHITE FLY SEED BUGS

80. CASSAVA CULTIVATION

81. CASSAVA MEALYBUGS

82. VARIEGATED GRASSHOPPER

83. GREEN SPIDER MITE

84. COTTON STAINER

85. COTTON

86. PESTS OF VEGETABLES

87. GRASSHOPPER

89. LEAF ROLLER

90. BEAN BEETLE

91. RICE WEEVILS

92. . PROBLEMS WITH PESTS CONTROL

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