2.4.1 National income

Question 1

What is the circular flow of income?

Answer 1

The circular flow of income is an economic model that illustrates money flows in an economy. There is a simple model which shows the money flows between households and firms. Compared to including government, financial sector and foreign trade.

Question 2

What does households provide firms with?

Answer 2

/Land
/Labour
/Capital
/Rent
/Wages
/Interest
/Profit

Question 3

What do firms provide households with?

Answer 3

/Goods
/Services
/Expenditure on goods and services

Question 4

What is the difference between income and wealth?

Answer 4

Income is a flow in the economy, whereas wealth is a stock of assets that can be used to generate income.