class 12 macroeconomics Circular flow of income important notes

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Circular flow of income....... short and easy notes for the board exam


1. Structure of four sector model.
> In Open Economy, following are the model of 4 sectors;

  • Household sector.
  • Producer sector.
  • Government sector.
  • External sector.

In Open Economy,
Y = C + I + G + ( X - M )
Whereas,
Y = production/income
C = consumption
I = investment
G = government expenditure
X = export
M = import

In closed economy,
Y = C = I

2. What do you mean by leakage of income?
>The part of income which is not returned back to circular flow is called leakage of income. Savings, taxes, imports are examples of leakage.

3.What do you mean by injection of income?
> Addition made in economy from outsources like investment, government-expenditure, and import are called Injection of income.

BONUS POINT


THE END

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