Following are the reasons for significance of circular flow:-
(1).Knowledge of Independence:-circular flow make help to understand interdependence between difference sectors of the economy.
Example:- it tells us about the interdependence between producers and hospitals.
(2).size of econome:-The magnitude of circular flow determines the size of National income. More the magnitude more is the National income and vise versa.
(3).Level of economic activity:-circular flow through its information on various macro variables, tells about the level of economy. This activity in the economy. This activity include investment, production, distribution and consumption of goods and services of levels.
(4). Injections and Lekages:- circular flow gives us information on injection like investment government spending expants lekages like stalking for and Impact.
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