How The Macroeconomy Works (circular Flow Of Income)

Question 1

Circular flow of income

Answer 1

A diagram showing how income moves around an economy

Question 2

Factors of production

Answer 2

Land - rent
Labour - wages
Capital - Interest
Enterprise - profit

Question 3

2 sectors of an economy and what role do they have in the market

Answer 3

Households - buy the nations output and own the factors of production

Firms - produce the nations output and hire the factors of production

Question 4

3 other ways households can use their income

Answer 4

Save it
Pay it on tax
Spend on foreign goods

Question 5

Leakages/withdrawals

Answer 5

Money that is not passed on in the circular flow to purchase goods and services

Question 6

3 leakages/withdrawals

Answer 6

Saving

Taxes

Import spending

Question 7

Injection

Answer 7

Money flowing into the economy that has originated outside the circular flow

Question 8

3 injections

Answer 8

Investment
Govt spending
Export revenue