Circular Flow Of Income Flashcards
What is the circular flow of income?
A model of the economy in which changed are represented as flows of money.
What are house holds in the circular flow of income?
The consumer in the economic agents, where they consumes a firms good and provide the factors of production to the firms.
What are firms in the circular flow of income?
Firms provide goods and services to households by combining the factors of production which the households supply to them.
What are factors of production in the circular flow of income?
What households provide to firms, being labour, land, capital and enterprise.
What are goods and services in the circular flow of income?
What firms combine the factors of production into, these commodities are then sold to the consumer.
What are factor incomes in the circular flow of income?
The income received from the factors, the rewards gained from each factor.
What is consumer expenditure in the circular flow of income?
The spending from households that then feeds into firms
What are leakages in the circular flow of income?
Money leaving the economy from factor incomes.
What are injections in the circular flow of income?
Money entering economy external from consumer expenditure.
Why is saving a leakage?
Because it’s money that people are not spending back into the economy.
Why are imports leakages?
It’s money that is being invested external from the county’s economy.
Why is taxation a leakage?
Taxation is a leakage because it’s money being removed off the the consumer so they have less money to spend within the economy.
Why is investment a injection?
It’s an injection because it’s money being invested externally from the economy so it’s increasing the amount of money within the country’s economy.
Why are exports a injection?
Exports are an injection because it’s money entering the economy external from the economy.
Why is government spending an injection?
Government spending is a injection because it’s money entering the economy that wasn’t in the economy previous to the spending.
