Circular Flow of Income Flashcards
How can you measure how rich an economy is?
Either using wealth or income
What is income?
Measures the flow of money a [eron/economy receives each year e.g. payslips (wages) or rent money
What is wealth?
A sum or stock of all your assets
What is an asset?
Items you own
What is the circular flow equation?
National income = national expenditure = national output
What are factor incomes?
Money paid by firms to households in return for factors of production
What is RGDP?
A statistic that measures national output. Measures all the goods and services being produced
What does RGDP stand for?
Real Gross Domestic Product (Real GDP)
What are leakages?
When money leaks out of the circular flow
What are the 3 types of leakages?
Savings, imports, taxes
What are savings?
The disposable income that isn’t spent by households
What are imports?
Spending on foreign goods and services
What are taxes?
Money paid to the government by firms, consumers, workers
What are injections?
When money is injected into the circular flow
What are the 3 types of injections?
Government spending, investment, exports
