2.4.1 National income Flashcards
1
Q
How does the circular flow of income work?
A
Firms and households exchange resources in an economy:
- Households supply firms with the factors of production, such as labour, land, capital, and in return, receive wages, rents and dividends
- Firms supply goods and services to households. Consumers pay firms for these
2
Q
What is national output?
A
The value of the flow of goods and services from firms to households
3
Q
What is national expenditure?
A
The value of spending by households on goods and services
4
Q
What is national income?
A
Income paid by firms to households in return for land, labour, capital and enterprise
5
Q
TRUE OR FALSE: National income= National output = National expenditure
A
TRUE
