Circular Flow Of Income Flashcards
1
Q
What is the circular flow of income?
A
It is a way of representing the flows of money between the two main groups of society, which are producers and consumers.
2
Q
What is an injection?
A
Money entering the circular flow of income.
3
Q
What is a withdrawal?
A
Money leaving the circular flow of income.
4
Q
What are the effects of injections?
A
Increased government spending
Sets off the multiplier effect
Increased aggregate demand
5
Q
What are the effects of withdrawals?
A
Reduced economic activity
Decreased aggregate demand
Reversed multiplier effect
6
Q
What is income?
A
Money received by factors of production.
7
Q
What is wealth?
A
A stock (collection) of assets.
8
Q
What are assets?
A
Something that is purchased by an investor.
