4.2 Introduction To Circular Flow Of Income

Question 1

Meaning of the circular flow of income

Answer 1

It shows how income , spending and output move around an economy

Question 2

Leakages / withdrawals

Answer 2

Leakages are withdrawals from the circular flow of income

Components :
A) Savings
B). Taxes
C) Imports

W=S + T + M

Question 3

Injections

Answer 3

Injections are additions to the circular flow of income

Components:
A) Investments (I)
B) Government spending (G)
C) Exports (X)

J= I + G + X