Circular flow of economy and business cycle Flashcards
1
Q
Stakeholders in a circular flow of economy
A
Households, Firms, Government + financial institutions, world markets
2
Q
World market leakage
A
import (less money in own economy)
3
Q
World market injection
A
export (more money in own economy)
4
Q
Government leakage
A
taxation (less money for firms and households to spend)
5
Q
Government injection
A
government spending (subsidies etc.) (more money for businesses and households to spend)
6
Q
Financial institutions leakage
A
Household savings (money not moving in economy)
7
Q
Financial institutions injection
A
loans (more money moving in economy)
8
Q
Business cycle phases (4)
A
- Recovery (growing: production, profits, employment, output GDP) 2. Boom (rapid growth of prices and inflation 3. Recession (less: money spent, jobs) (expansionary fiscal policy) 4. Trough (no jobs, banks shut down) (low price rates and good exchange rate will raise economy)
