2.4.1 National Income ✅

Question 1

What is the circular flow of income?

Answer 1

Economic model illustrating money flow.

Question 2

What is the distinction between income and wealth? Give examples?

Answer 2

Income is a flow but wealth is a stock of asset.
Income is what money flows in (interest from saving).
Wealth is what you own (housing).

Question 3

Draw the circular flow of income?

Answer 3

Household and firms.
Money moves in one direction factors of production and G/S the other.

Question 4

Explain the circular flow of income?

Answer 4

Households own wealth/resources which is given to firms though factors of production (they are paid a wage).
Firms use these to produce g/s and sell this to households.

Question 5

What are the other key parts of circular flow? How do these effect the circular flow?

Answer 5

Gov (G,T)
Financial (C,S)
Foreign markets (X,M)
(Either add to the flow or take away from it).