2.4 National income

Question 1

The circular flow of income

Answer 1

• The households provide factors of production eg. Labour in return for which they receive wages.
• People then use their incomes to buy consumers goods and services.
• Given this circular flow of income, by definition national income = national output = national expenditure.

Question 2

Income and Wealth

Answer 2

• Wealth is the value the total assets of worth owned by an individual, firm or country. It is therefore a stock concept and can be measured at a particular point in time.
• Income is a flow of money received by factors of production e.g. wages, rent, profit and interest. It is measured over a period of time.