The circular flow of income defines the?

A. relationship between ends and means in the economic system
B. allocation of income to various members of the household
C. flow of goods, services and money among the various micro-sectors of the economy
D. micro-economic relationships in economic analysis

Correct Answer:

Option C – flow of goods, services and money among the various micro-sectors of the economy

Explanation

The circular flow of income is a neoclassical economic model depicting how money flows through the economy. In its simplest version, the economy is modeled as consisting only of households and firms. Money flows to workers in the form of wages and money flows back to firms in exchange for products.