Saturday, 3 March 2012


         The significance of circular flow of income can be explained as below:-

1. It provides the clea cut picture of the working of an economy whether it is working efficently or there is any disturbance in the smooth working.
2. With the help of circular flow of income,we can study the problem of diseqilibrium.It also focusses on the ways and means to restore the position of disequilibrium.
3. The study of circular flow of icome helps to know the importance of monetary policy to bring about the equality between savings and investment in the economy.
4. The study of the circular flow of income highlights the importance of fiscal policy.
5. With the help of circular flow of income, we can judge the significance of compensatory fiscal policy.

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