2.4.1 - National Income

Question 1

What Is The Circular Flow Of Money?

Answer 1

An economic model that illustrates money flows in an economy.

Question 2

What Is Wealth?

Answer 2

Assets which can be used to generate a flow of income.

Question 3

Who Owns Wealth & Resources (FOPs) In The Economy?

Answer 3

Households.

Question 4

What Is Income?

Answer 4

Flow in the economy.

Question 5

What Is National Income?

Answer 5

The value of the output of an economy over a period of time.

Question 6

Describe The Governments Role In The Circular Flow Of Income?
(2 Points)

Answer 6

~ They take money out of the economy through taxation.

~ They add money into the economy through government spending.

Question 7

Describe Financial Services Role In The Circular Flow Of Income?
(2 Points)

Answer 7

~ Inject money in through investment.

~ Take money away when consumers or producer save.

Question 8

Describe Foreign Markets Role In The Circular Flow Of Income?
(2 Points)

Answer 8

~ When foreigners buy goods it puts money into the economy through exports.

~ When domestic citizens buy goods abroad it takes money away from the economy through imports.

Question 9

Describe The Circular Flow Of Income
(5 Points)

Answer 9

~ Households provide the firms with FOPs in return for rent, wages, profit and interest.

~ Households use this money to buy goods and services produced by firms.

~ Firms purchase FOPs from households.

~ They use their resources to produce goods and services.

~ Then sell goods and services to households to receive sales revenue.