Ch25 Circular Flow Of Income Flashcards
What withdrawals are there?
Savings
Taxes
Imports
What injections are there?
Investment
Gov spending
Exports
What are transfer payments?
Incomes received with no output into economy (eg benefits)
What do firms supply to households?
Rent Wages Profit Interest Goods Services
What do households provide to firms?
Factors of production (land, labour, capital, entrepreneurs)
Expenditure on goods and services
National output = ?
National income = national expenditure
Define GDP?
The monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
Define GNP?
GNP is the market value of all the products and services produced in one year by labour and property supplied by the citizens of a country.
How do you calculate GDP?
C + I + G + (X-M)
Difference between GDP and GNP?
GNP takes into account net foreign income.
6 things that cause problems comparing NI over time?
Prices (inflation) Inaccurate NI measures Changes in population Quality of goods and services Defence related expenditure Income distribution
5 things that cause problems comparing NI between countries?
Different: income distributions Population sizes Accuracy of NI Purchasing power (cost of living) Extra costs in certain countries
4 things that affect accuracy of NI stats?
Hidden economy
Home produced devices
Public sector
Statistical errors
Define circular flow of income?
A model of the economy which shows the flow of goods, services and factors in their payments around the economy.
Define closed economy?
An economy where there is no foreign trade.
