Circular Flow Of Income

Question 1

What does circular flow of income mean

Answer 1

Circular Flow of Income means shows the movement of economic resources and wealth throughout the economy

Question 2

Closed economy

Answer 2

this is an economy that does not trade with any other country i.e. there are no imports or exports of goods & services

Question 3

Open economy

Answer 3

this is an economy where people and businesses trade goods and services with other countries e.g. Ireland buys oranges from Spain and sells milk to France

Question 4

Leakages and injections

Answer 4

Leakage: When households do not spend all their money, their savings create a leak from the circular flow of income.
Injection: Banks can lend this money to households, which is then injected back into the economy.