Circular Flow of Income

Question 1

What does the Circular Flow of Income show

Answer 1

This shows the connections between different sectors. It revolves around flows of goods and services and factors of production between firms and households.

Question 2

What are the Leakages

Answer 2

• Savings (S)
• Taxation (T)
• Imports (M)

Question 3

What are the Injections

Answer 3

• Investment (I)
• Govt. Spending (G)
• Exports (X)

Question 4

What is National Income

Answer 4

This measures the monetary value of the flow of output of goods and services produced in an economy over a period of time.

Question 5

What is Gross Domestic Product (GDP)

Answer 5

GDP is the total value of output in an economy.

Question 6

What is Gross National Income

Answer 6

GNI measures the final value of incomes flowing to UK owned facts of production, whether they are located in the UK or overseas.

• GNI = GDP + Net property income from abroad

Question 7

What is Nominal Growth

Answer 7

Growth of GDP before inflation has been accounted for. (at current prices)

Question 8

What is Real Growth

Answer 8

Growth of GDP after inflation has been accounted for. (at constant prices)