The concept of 'Circular Flow of Income' is associated with:
A. Microeconomics
B. Macroeconomics
C. International economics
D. Development economics only
Answer: Option B
Solution (By JKSSB Mock Tests)
The circular flow of income is a macroeconomic concept that shows the continuous movement of goods, services and money between households, firms, government and the external sector.
Explanation:
The Baumol-Tobin inventory-theoretic model derives transactions demand for money as a function of income (or expenditure), the interest rate and the fixed cost of transferring funds between money and interest-bearing assets.
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