CIRCULAR FLOW OF INCOME

Question 1

who are the three econmic agents

Answer 1

governments

households

firms

Question 2

who are the three econmic agents

Answer 2

governments

households

firms

Question 3

who are the fundamental economic agents

Answer 3

households and firms

Question 4

what is the circular flow of income

Answer 4

movement of spending and income throughout the economy

Question 5

what do households giv to firms

Answer 5

FOP

Question 6

What do firms do with the fop given to them by households

Answer 6

combine them to make goods and services

Question 7

in reward for giving FOP what do households get

Answer 7

factor incomes

Question 8

what are factor incomes

Answer 8

flow of income that is derived from the factors of production

Question 9

each FOP has a

Answer 9

reward

Question 10

each FOP has a reward which is also known as

Answer 10

factor income

Question 11

what is the reward for provinding the FOP Labour

Answer 11

wages + salaris

Question 12

what is the reward for provinding the FOP Land

Answer 12

RENT

Question 13

what is the reward for provinding the FOP enterprise

Answer 13

Profit

Question 14

what is the reward for provinding the FOP capital

Answer 14

interest

Question 15

what do households do with factor incomes

Answer 15

spend on g/s made by firms

Question 16

spending on g/s made by firms is

Answer 16

expenditure

Question 17

draw teh basic circula flow of icome

Answer 17

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

Question 18

whats wrong with the circular flow of income

Answer 18

ignores two fundamental sectors

Question 19

who are the two fundamental sectors/agents the CFI ignores

Answer 19

government

international sector

Question 20

not all income earnt is …

Answer 20

spent in the economy

Question 21

we dont have to spend money in goods and services made in our economy out thise abroad these are known as

Answer 21

imports

Question 22

leakages are also known as

Answer 22

withdrawals

Question 23

what are leakages

Answer 23

ways income exits the circular flow of income(economy) and how they are not directly spent on g/s produced in econ

Question 24

state the leakages

Answer 24

savings S

tax T

imports M

Question 25

what are injections

Answer 25

ways money can enter an econom outside of consumer expenditure

Question 26

state the injections

Answer 26

investment I

government spending G

exports X

Question 27

state the injections

Answer 27

investment I

government spending G

exports X

Question 28

What is investment

Answer 28

firms expenditure on capital goods

Question 29

injections and leakages help us to bring in the

2 marks

Answer 29

governemtn

international sector

Question 30

adding inkections and leakaes to the CFI allows us to get

Answer 30

full sector circular flow of income

Question 31

what are two ludicrous assumptions we make in the circula r flow iof income regarding injections and eajages

Answer 31

we assume only spending on g/s produced in our econ is done by hiouseholds

we assume all incomes are