The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction. This is an important concept as it consolidates your understanding to grasp other complex mechanisms in an economy.
In this video, you will learn how income and expenditures behave with respect to each other and how money and goods and services flow with respect to each other.
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