Circular Flow of Income Flashcards
1
Q
What is circular flow of income?
A
Shows how money flows from households to firms. Then the firms pay household wages.
2
Q
What are injections?
A
This is an increase of expenditure into the circular flow of income leading to an increase in AD.
- Exports
- Government spending
- Investment
3
Q
What are withdrawals?
A
Withdrawals are a reduction of money into the circular flow. Sometimes known as leakages.
- Savings
- Imports
- Taxation
4
Q
Physical and Monetary Flows
A
Physical flows involve the transfer of goods
Monetary flows involve the sending of payments to workers or goods.
