Economics - 2.1.1 - Circular Flow Of Income Flashcards
What is GDP?
The total value of output in an economy used to measure the change in economic activity
What are the 3 ways to calculate GDP?
Income, output and expenditure
What is National Income?
Measures the monetary value of the flow of output of goods and services produced.
What is included in the GDP of National Income?
income from jobs + profits from private businesses + rent income from land ownership = GDP
What isnt included in the GDP of National Income?
Benefits, private transfers of money and undeclared income
(nothing done to earn the money)
What is national output?
The total value of output of goods and services produced.
What is National Expenditure?
the amount spent on goods in an economy
Whats included in National Expenditure?
Personal consumption (C), Private investment (I), gov expenditure (G) and Net exports (X-M)
Personal consumption (C), Private investment (I), gov expenditure (G) and Net exports (X-M)
Firms provide goods to households in return for household expenditure
Households provide factors of production in return for incomes
What is circular flow of income?
a simple static model of basic flow of money
What are Leakages?
increase in savings, taxes or imports to reducing circular flow of income and lead to fall in output
What are the different types of leakages
put aside for savings
paid to the gov through taxation
spent on imports
What are Injections
additions to investment, gov spending or exports to boost circular flow of income
what are the different types of injections
capital spending by firms eg investment expenditure
gov expenditure
overseas buying uk goods ( exports)
How is there an equilibrium in the circular flow of income
economy is in equilibrium when the rate of injections = rate of leakages in the CFI
