1.

Circular flow of income

Answer»

The circular flow means the unending flows of production of goods and services, income and expenditure in an economy. It shows the redistribution of income in a circular manner between the production unit and households.

These are Land, Labour, Capital and Entrepreneurship

  • The contribution made by fixed natural resources (called ‘land’), payment for which is called ‘rent’
  • The contribution made by a human worker (labour), payment for which is called ‘wage’.
  • The contribution made by capital, payment for which is called ‘interest’.
  • The contribution made by entrepreneurship, payment for which is ‘profit’.


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