CHAPTER 28 NATIONAL INCOME

Question 1

Circular flow of income

Answer 1

A model of the economy which shows the flow of goods, services and factors and their payments around the economy.

Question 2

Closed economy

Answer 2

An economy where there is no foreign trade

Question 3

Income

Answer 3

Rent, interest, wages and profits earned from wealth owned by economic actors

Question 4

Injections

Answer 4

In the circular flow of income, spending which is not generated by households including investment, government spending and exports.

Question 5

National income

Answer 5

The value of the output, expenditure or income of an economy over a period of time.

Question 6

Open economy

Answer 6

An economy where there is trade with other countries.

Question 7

Wealth

Answer 7

A stock of assets which can be used to generate a flow of production or income. For example, physical wealth such as factories and machines is used to make goods and services.

Question 8

Withdrawals or leakages

Answer 8

In the circular flow of income, spending by households which does not flow back to domestic firms. It includes savings, taxes and imports.