Circular flow of income of Business economics

        The different units of economy interaction going to happen with the circular flow of income. It explain how the household income become the firm’s income that utilize for production and also pays to labour and these firm’s provide income for households. With the circular floe of income the gross domestic product and national income going to be calculated. The four sector of the economy include foreign, government, firm and household clearly explain the income of the country. It also include international that consist of export and import.

        In the above diagram the withdrawal are the factors that leak the economy through imports, taxes and savings and the injections are the factors that became the cause of addition in the economy like exports, spending of government and investment. (Agarwal, n.d.)

    The above diagram show the domestic circular flow of income that show external factors include business exporting goods and services and consumers and buying imported products of business . Economy going to be in equilibrium position when the rate of withdrawals equals to rate of injection in the circular flow of income. Because the overall flow of circle show how the income going to move from one sector to another the complete the requirements in most effective manner. (tutor2u.net, 2019)