12. The Circular Flow Of Income.

Question 1

Recession

Answer 1

When an economy is growing at a rate lower than its long run trend rate of growth.

Question 2

Balance of payments.

Answer 2

Exports minus imports.

Question 3

Injections.

Answer 3

Money that originated outside the circular flow.

Question 4

Withdrawals.

Answer 4

Money that isn’t passed on in the circular flow.

Question 5

Investment.

Answer 5

Spending by firms on buildings, machinery and improving skills of the labour force.

Question 6

Savings (S)

Answer 6

A withdrawal from the circular flow.

Question 7

Income induced.

Answer 7

Where something increases when income increases and decreases when income decreases

Question 8

Multiplier effect.

Answer 8

When a increase or decrease in spending results in a larger than proportionate change in the national income.

Question 9

Nat government spending.

Answer 9

The difference between G and T

Question 10

Fiscal policy.

Answer 10

The policy of the government regarding G and T

Question 11

Disposable income

Answer 11

Available income after payments of income tax and national insurance contributions.

Question 12

Economic models

Answer 12

Diagrams used to show the essential characteristics of complicated economic conditions in order to analyse them and predict results of a change in variables.