An important concept at this point is that money flows in direction and resources goods and services in the other direction i.e there are monetary and real flows.                                                     

In figure money to business in return for the actual do not and services households do not provide their factors services free they are paid

Firm the above analysis it can be noted that there is a close relationship between a nation's income output and expenditure.

Thus the amount of the economic activity can be estimated in three ways By adding up the value of all goods and services produced in a given year (O) By adding up the value   of all the spending that occurred during the year (E) The results obtained should be identical Total income (Y) total production (0) total expenditure (E)