Question on: JAMB Economics - 1995

The circular flow of income illustrates how money and resources move through an economy.

• Arrow L represents the flow of payments from households to firms for the goods and services they consume. This is because households purchase goods and services from firms, and in exchange, the households pay money to the firms.
• Arrow K represents the flow of factors of production (land, labor, capital, and entrepreneurship) from households to firms.
• Arrow M represents the flow of goods and services from firms to households.
• Arrow N represents the flow of income (wages, rent, interest, profit) from firms to households.