QUEBTION 2 THE ECONOMIC CYCLE 21 marks 2.1 The resiflow refers to the flow of factors of produetion and the flow of goods (2) and services. What does this mean in practioe?

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The term “real flow” (often also called the resource flow) describes the continuous movement of physical goods, services, and factors of production in the economy. In practice, this means that:

• Households supply factors of production (such as labor, land, and capital) to firms.  
• Firms, using these factors, produce goods and services.  
• These goods and services then flow back to households through the market, where they are purchased and consumed.

This cycle represents the tangible, “real” side of the economy, as opposed to the money (or monetary) flows that accompany these transactions.
In practice, the real flow means households provide factors like labor and capital to firms, firms produce goods and services, and these are then bought and consumed by households, creating a continuous cycle of production and consumption in the economy.

QUEBTION 2 THE ECONOMIC CYCLE 21 marks 2.1 The resiflow refers to the flow of factors of produetion and the flow of goods (2) and services. What does this mean in practioe?

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