Circular Flow of Income

Question 1

Circular Flow of Income

• Definition

Answer 1

Models all of the exchanges between economic agents in an economy.

Question 2

Circular Flow of Income

• Injections
• Withdrawals
• Factor income
• Economic agents

Answer 2

• Investment, exports and government spending
• Saving, imports and taxation.
• Wages (labour), profits (entrepreneurship), rent (land) and interest (capital).
• Households, firms, government and the rest of the world.