2nd test on circular flow and AD

Question 1

what do firms give hh and what do firms get in return

Answer 1

1. hh spend their money on firms and firms provide them with income
2. Households provide factors of production (inputs) and firms produce goods and services (outputs)

Question 2

what are some injections into the circular flow

Answer 2

government spending
investment
exports

Question 3

what are some leakages from the circular flow

Answer 3

tax
imports
savings

Question 4

how can growth be determined

Answer 4

when there is a net of injections

Question 5

what is aggregate demand

Answer 5

total demand of a country’s goods and services at given prices and time period

Question 6

what is the x axis and y axis on AD curve

Answer 6

y = RNO
x = price(inflation)

Question 7

what is the wealth effect

Answer 7

affects consumption as a result of increase in asset prices

Question 8

what is the trade effect

Answer 8

as prices decrease exports become more competitive because there is more demand

Question 9

what is the interest effect

Answer 9

as prices fall interest falls = more expenditure /demand

Question 10

effects of asset prices

Answer 10

as assets rise people become more confident to spend