2.4.1 Circular flow of income

Question 1

Income

Answer 1

flow of money

Question 2

Circular flow of income

Answer 2

-Households supply firms with factors of production (capital, enterprise, land, and labour) which are then used to make goods/services.
-These goods/services are then bought by households
-And firms spend this money on factor incomes such as wages, rent, interest and dividends.

Question 3

Wealth

Answer 3

stock of assets

Question 4

Circular flow equation

Answer 4

National Input = National Enterprise = National Output

Question 5

Injections

Answer 5

Money entering the economy - Investment, Government spending, Exports

Question 6

Withdrawals

Answer 6

Money leaving the economy - Savings, Taxation, Imports

Question 7

Factor incomes

Answer 7

Money paid by firms to households in return for factors of production.

Question 8

Real GDP

Answer 8

Total national output/income/expenditure adjusted for inflation

Question 9

Injections > Withdrawals

Answer 9

Circular flow increases, resulting in an increase in real GDP

Question 10

Injections < withdrawals

Answer 10

Circular flow decreases, resulting in a decrease in real GDP