Ch 6: Circular Flow of Income

Question 1

What does a circular flow of income look like? What does T, G, M, X stand for?

Answer 1

T-tax, compulsory payment exacted by govt., without correlation to services received G-govt spending, injection to the circular flow that helps offset taxation leakage M-imports, goods and services received from abroad X-exports, injections of funds because goods and services produced by local firms using local resources are paid for by incomes that were not earned in this economy

Question 2

What does circular flow equal?

Answer 2

S + T + M=I + G + X leakages=injections

Question 3

What does Y, O and E represent and what do the blue and orange lines represent?

Answer 3

Y=income O=output E=consumer expenditure blue=money flow orange=real flow

Question 4

How is GDP calculated?

Answer 4

GDP = C + I + G + X -M

Question 5

What is money a measure of?

Answer 5

output