Circular Flow of Income

Question 1

Circular Flow of Income

Answer 1

An economic model showing the flow of goods and services, factors of production and payments between households and firms within a closed economy.

Question 2

Flows from firms to households

Answer 2

• Goods and services
• Income (rent, wages, interest, profit).

Question 3

Flows from households to firms

Answer 3

• Expenditure on goods and services.
• Factors of production.

Question 4

Injections into the Circular Flow of Income

Answer 4

• Exports
• Investment
• Government Spending

Question 5

Withdrawals from the Circular Flow of Income

Answer 5

• Savings
• Imports
• Taxation

Question 6

Equilibrium in Circular Flow of Income

Answer 6

Injections = Withdrawals