2.1.1 - economic growth

Question 1

Draw the circular flow of income

Question 2

Three ways of measuring economic activity?

Answer 2

1. National output
2. National expenditure
3. National income

Question 3

measuring economic activity

National output

Answer 3

value of the flow of goods and services from firms to households

Question 4

measuring economic activity

National expenditure

Answer 4

the value of spending by households on goods and services

Question 5

measuring economic activity

National income

Answer 5

the value of income paid by firms to households in return for land, labour and capital.

Question 6

households own the wealth of the nation – stock of land, labour and capital used to produce goods and services and they supply these factors in return for income:

Answer 6

Factors for production (CELL)

• Capital – manufactured item to aid production – interest
• Enterprise – individual/business setup and employed different factors of production - profit
• Land – raw materials from mining, fishing and agriculture - rent
• Labour – human workers producing goods and services - wages

Question 7

Distinction between income and wealth

Answer 7

Income is a flow of money going to factors of production and Wealth is a stock concept - what you own