Question

"Disposition Phase of circular flow of Income involves flow of factor Income, which comprises of rent, wages, interest and profits from firms to households." 

Defend or refute the statement, giving valid reasons in support of your answer. 

Answer 1

• The given statement is refuted as the disposition phase of the circular flow of income includes expenditure on goods and services by the households.
• There are three phases in a circular flow of income i.e., the first phase is comprised of production, the second phase is comprised of income generation or distribution of factor income and the third phase is the disposition phase.