2.4 - National Income

Question 1

What is the distinction between Income and Wealth?

Answer 1

Wealth is a stock of assets whilst income is a flow. Wealth is what people own e.g. houses, whilst income is the money they receive e.g. money from work.

Question 2

What are injections into the circular flow of income?

Answer 2

• Government Spending (G)
• Investment (I)
• Exports (X)

Question 3

What are withdrawals from the circular flow of income?

Answer 3

• Taxes (T)
• Savings (S)
• Imports (M)

Question 4

What is the impact of injections and withdrawals?

Answer 4

If the sum of injections is greater than the sum of withdrawals, then the economy will be growing, and vice versa.