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Differentiate between money flows and real flows in the circular flow model.

Money flow:

  • Factor remuneration represents the expenditure of producers 
  • And the income of households e.g. wages, rent, interest and profit 
  • Consumption expenditure represents the expenditure of households and the income of producers
  • Government and foreign sector payments 
  • Import payments (expenditure) and export earnings (income) 

Real flow:

  • Factors of production flow from the owners (households) to producers via the factor markets 
  • Goods and services flow from the producers via the goods markets to households and other users of goods and services 
  • Factors of production and goods and services flow from foreign countries to South Africa (imports) 
  • Factors of production and goods and services flow from South Africa to foreign countries (exports) 

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