What are real flow and money flow?

Money flow and real flow are the two main aspects of the circular flow of income economic model. Real flows refer to the flow of the actual goods or services, while money flows refer to the payments for the services (wages, for example) or consumption payments.

What flows between households and firms?

The circular flow of income illustrates the links between income and spending in an economy. In its simplest form, revenue earned by firms by selling their output ultimately flows to households, which spend this income on the output produced by firms.

What is the other name of real flow and money flow?

Real flow is also termed as physical flow because in real flow there is an actual movement of goods and services between households and firms. On the contrary, money flow is alternately known as nominal flow, because the transactions take place, using money as a medium of exchange.

What is real flow known as?

Real flow is also known as physical flow. Real flow refers to the flow of goods and services across different sectors of the economy. Flow of factor services from household sector to the producer sector or flow of goods and services from producer sector to household sector are examples of real flows.

What is the best money flow indicator?

The best-known indicator in this category is Granville’s Obv. Later variations include Markstein’s volume price trend (Vpt) and the volume flow indicator (Vfi), which I introduced in my June 2004 Stocks & Commodities article (see “Suggested reading” at the end of this article).

What is the difference between households and firms?

Firms produce goods and services using factors of production. These are inputs such as labor, land and capital. Households consume the goods and services that firms produce. Households and firms interact in two markets: the market for goods and services and the market for factors of production.

What are the three flows shown in the circular flow model?

A circular flow model of the macroeconomy containing three sectors (business, household, and government) and three markets (product, factor, and financial) that illustrates the continuous movement of the payments for goods and services between producers and consumers, with particular emphasis on taxes and government …

What are the examples of money flow?

The households, in turn, receive factor income (rent, wages, interest, profit) in the form of money from the firm sector. This is money flow. With the money income thus earned, the households purchase from firms goods and services like food, cloth, house, shoes, educational, medical and banking facilities, etc.

Why are money flows opposite to real flows?

Because money flow are in response to the real flows. So that money flows from the households to producers in terms of consumption expenditure. Likewise there is a real flow of factor services from the households to the producers.

What is the difference between real flows and money flows?

Similarly, when households spend their incomes on purchase of goods and services and as result money flows back to firms, these also indicate money flows. The difference between the real flows and money flows can be explained further with an illustration.

How are factors of production related to money flow?

Factors of production flows from households to firms. Concurrently, goods and services are supplied by the firms to households. Remuneration is provided to households by the firms for factor services. Concurrently, goods and services are purchased from the business sector by the households. Exchange of goods and services without the use of money.

Why are goods and services referred to as real flows?

These refer to the flows of goods and services. These are real because they consist of actual goods and services. When factor services (services of land, labour, capital, enterprise) flow from household to firms which require them for producing goods and services, these are called real flows.

Which is the real flow in the factor market?

In the factor market, the real flow is the flow of the factors of production – the quantity of labour, capital, land and entrepreneurship – from households to firms. The monetary flow is the flow of income in terms of money from firms to households – in other words, the amount that is paid in wages and salaries, interest, rent and profits.