Statement 1: Circular flow of Income does not take place in case of closed economy.
Statement 2: Flow of income is circular in a two-sector economy.
In the following questions, read the following statements and choose the correct alternative among those given below:
(a) Both the Statements are true.
(b) Both the Statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.
Ans – (d)
Flow of income is circular in a two-sector economy as all factor income is expended by households on the purchase of goods and services produced in an economy due to the assumption of zero savings.
Thus Statement 1 is false and Statement 2 is true.