2. Circular Flow Of Income 25

Question 0

Closed economy

Answer 0

An economy where there is no foreign trade.

Question 1

Circular flow of income

Answer 1

A model of the economy which shows the flow of goods, services and factors and their payments around the economy.

Question 2

GDP- Gross Domestic Product

Answer 2

Measures the national income which exclude and include respectively net income from investments abroad, but do not include an allowance for depreciation of the nation’s capital stock.

Question 3

Hidden, Black, Informal economy

Answer 3

Economic activity where trade and exchange take place, but which goes unreported to the tax authority.

Question 4

Injections

Answer 4

In a circular flow of income, spending which is not generated by households including investment, government spending and exports

Question 5

National income

Answer 5

The value of the output, expenditure or income of an economy over a period of time

Question 6

Purchasing power parities

Answer 6

An exchange rate of ones currency for another which compares how much a typical basket of good in one country costs compared to that of another country.

Question 7

Transfer Payments

Answer 7

Income for which there is no corresponding output, such as unemployment benefits or pension payments.

Question 8

Wealth

Answer 8

A stock of assets which can be used to generate a flow of a production company or income. Eg physical wealth such as factories and machines is used to make goods and services.

Question 9

Withdrawals or leakages

Answer 9

In the circular flow of income, spending by households which do not flow back to domestic firms. It includes savings, taxes and imports.