2.4.1: National Income Flashcards
How do households contribute to the circular flow of income?
Receive income through wages & salaries from their jobs & investments.
Buy goods/services from firms (consumer spending).
How do firms contribute to the circular flow of income?
Hire factors of production when making products, for which they pay wages & rent.
Receive revenues & profit from consumer spending.
How does the government contribute to the circular flow of income?
Collects taxes to fund state spending on public services (e.g. education, healthcare, defence, welfare).
How does the external sector contribute to the circular flow of income?
The UK buys imports from other countries.
Overseas businesses & consumers buy exports from the UK.
What is income?
A flow of money (derived from a stock of assets).
What is wealth?
A stock of assets.
What are examples of income?
-Wages.
-Profits.
-Welfare payments.
What are examples of wealth?
-Savings.
-Property.
-Pension schemes.
What is national income?
The sum of all the income made in the economy on an aggregate level.
What is the circular flow of income?
A model which shows the flow of goods/services, the factors of production & money around the economy.
