Circular flow of income

Question 1

National income accounts

Answer 1

Measures how much output, spending and income has been generated in a given period of time, shows us GDP (economic growth is measured by changes in GDP)

Question 2

3 ways of calculating GDP

Answer 2

Output
Expenditure
Income

Question 3

Output

Answer 3

Total value of the output of goods and services produced in the UK (from primary, secondary and tertiary sectors-from firms)

Question 4

Expenditure

Answer 4

Total amount of spending taking place in the economy (by firms and households)

Question 5

Income

Answer 5

Total income generated through production of goods and services ( from firms to households for factors of production-Labour)

Question 6

GDP methods

Answer 6

All methods should sum to the same amount (national output=national income=national expenditure)

Question 7

What does GDP include

Answer 7

Output of foreign owned businesses if the are located in the UK e.g. Nissan vehicles produced in Sunderland still contribute to the UK’s GDP

Question 8

GNP

Answer 8

Gross national product is an estimate of the total value of all final products and services turned out in a given time period by means of production owned by a country’s citizens (even if currently located out of the UK)

Question 9

GNP formula

Answer 9

GDP+ income from citizens abroad (includes interest, dividends, profits)- income earned by foreign residents

Question 10

Circular flow

Answer 10

Shows the movement of money around the economy

Question 11

Real vs Nominal income (GPD)

Answer 11

If your wages increase by 2%, you might not be better off in real terms. if inflation is 3%, even though you are earning more, you are 1% worse off. as your purchasing power has decreased.

Question 12

Diagram of circular flows

Answer 12

https://docs.google.com/document/d/1vXFBTUy4V2T9Zq7rpDgDpeDSf6ghrjQtNtU58CBYuNc/edit