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Money flows are opposite to real flows. How?

Asked by Topperlearning User 15th April 2016, 2:30 PM
Answered by Expert

There is a flow of goods and services from the firms to the household sector and there is a flow of factor services from the household to firms. 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.

The money flows from the households to producers in terms of consumption expenditure. On the other hand, money flows from the firm to the households in terms of factor payments. Thus, money flows are opposite to real flows.

Answered by Expert 15th April 2016, 4:30 PM
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