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Macroeconomics Y12 > Circular Flow Of Income > Flashcards

Circular Flow Of Income Flashcards

1
Q

3 methods of calculating national income

A

expenditure method
income method
output method

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2
Q

how to calculate expenditure method

A

GDP= C+I+G+(X-M)

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3
Q

how to calculate income method

A

sum of the 4 different type of incomes- land, labour, capital and enterprise

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4
Q

how to calculate output method

A

value added by each enterprise in the production phase is measured

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5
Q

what is circular flow

A

connections between different sectors- shows the flows of goods and services and factors of production between firms and households

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6
Q

what is the circular flow of income pattern

A

production, income, expenditure, production

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7
Q

what are physical flows

A

movement of goods, services and labour

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8
Q

what are monetary flows

A

movement of money in return for the physical flow

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9
Q

what are leakages

A

not all income will flow from households to businesses directly:
savings
taxes
spent on imports

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10
Q

what are withdrawals

A

increases in savings, taxes or imports- reduce the circular flow of income and national income

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11
Q

what are injections

A

additions to investment, government spending or exports so boost the circular flow of income

  • capital spending by firms (I)
  • government expenditure G)
  • UK export expenditure by foreign residents (X)
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12
Q

how to calculate APC

A

consumption/income

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13
Q

how to calculate APS

A

savings/income

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14
Q

MPC

A

how much consumption will change following a change in income
change in consumption/change in income

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15
Q

MPS

A

how much savings will change following a change in income

change in savings/change in income

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16
Q

MPM

A

change in imports/change in income

17
Q

MPT

A

change in tax/change in income

18
Q

MPW

A

MPS+MPT+MPM

19
Q

factors that determine the MPC

A

income levels
temporary/permanent rise in income
interest rates
consumer confidence

20
Q

what is short run

A

year long- at least 1 factor of production is fixed

21
Q

what is long run

A

more than 1 year long- all factors of production of a firm are variable

22
Q

aggregate supply

A

total output that producers in an economy are willing and able to supply at a given price level I a given time period

23
Q

at higher prices what will happen to supply

A

more will be supplied as there are more profits available

24
Q

3 points of a Keynesian AS curve

A

1- AS is perfectly elastic, low output, high unemployment
2-higher output, low unemployment
3-AS curve perfectly inelastic maximum output, 0 unemployment

25
Q

what is equilibrium

A

a condition or state in which economic forces are balanced

Macroeconomics Y12 (10 decks)

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