27) The circular flow of income Flashcards
1
Q
What is the circular flow of income?
A
A model of the economy which shows the flow of goods, services and factors and their payments around the economy
2
Q
What is a closed economy?
A
An economy where there is no foreign trade
3
Q
What is an open economy?
A
An economy where there is trade with other countries
4
Q
What are injections?
A
Spending which is not generated by households
5
Q
What are withdrawals or leakages?
A
Spending by households which does not flow back to domestic firms
6
Q
What are the 3 injections?
A
- Investment
- Exports of goods and services
- Government spending
7
Q
What are the 3 withdrawals or leakages?
A
- Saving
- Imports of goods and services
- Taxation
