circular flow of income

Question 1

describe circular flow of income

Answer 1

-households give/ firms receive: factors of production, consumer expenditure
-firms give/ households receive: factor incomes, goods and services

Question 2

injections and withdrawals

Answer 2

-injections: government spending, investment, exports
-withdrawals/ leakages: savings, imports, taxes

Question 3

economic growth with withdrawals and injections

Answer 3

injections>withdrawals= growth
injections<withdrawals= decrease in growth
if equal then it stays the same

Question 4

GDP methods (how to measure) and equations

Answer 4

-output method: measuring the value of all goods and services produced in a fiscal year
-income method: measuring all factor incomes in a year
-expenditure method: consumer expenditure (C+I+G+(X-M))
-output=income=expenditure