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5 June, 12:47

In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income?

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  1. 5 June, 13:11
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    Because every transaction has a buyer and a seller

    Explanation:

    Because every transaction has a buyer and a seller, every penny spent on a good or service must end up as someone's income.

    The economy seem to operate in a circular motion as illustrated in the circular flow diagram. Economists use this diagram to demonstrate how the economy of a nation operates, by demonstrating how money, services and goods navigate in the economy.
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