CIRCULAR FLOW OF INCOME Flashcards
who are the three econmic agents
governments
households
firms
who are the three econmic agents
governments
households
firms
who are the fundamental economic agents
households and firms
what is the circular flow of income
movement of spending and income throughout the economy
what do households giv to firms
FOP
What do firms do with the fop given to them by households
combine them to make goods and services
in reward for giving FOP what do households get
factor incomes
what are factor incomes
flow of income that is derived from the factors of production
each FOP has a
reward
each FOP has a reward which is also known as
factor income
what is the reward for provinding the FOP Labour
wages + salaris
what is the reward for provinding the FOP Land
RENT
what is the reward for provinding the FOP enterprise
Profit
what is the reward for provinding the FOP capital
interest
what do households do with factor incomes
spend on g/s made by firms
spending on g/s made by firms is
expenditure
draw teh basic circula flow of icome
households at top
firms at bottom
innr line from hh to firm = fop
inner line from firm to hh = goods and services
outerline from firms to households factor incomes
outerline from househjolds to firms = consumer expenditure
whats wrong with the circular flow of income
ignores two fundamental sectors
who are the two fundamental sectors/agents the CFI ignores
government
international sector
not all income earnt is …
spent in the economy
we dont have to spend money in goods and services made in our economy out thise abroad these are known as
imports
leakages are also known as
withdrawals
what are leakages
ways income exits the circular flow of income(economy) and how they are not directly spent on g/s produced in econ
state the leakages
savings S
tax T
imports M
