Macroeconomic objectives and the circular flow of income Flashcards
List the 6 macroeconomic objectives
- Low and stable inflation
- Sustainable government debt
- Low unemployment
- Sustainable economic growth
- Balance of trade
- Equality of opportunity
What is a withdrawal?
Deliberately taking money out of the economy
What is an injection?
Putting money into the economy
What is a leakage?
A non-deliberate withdrawal
What kind of taxes do the government collect from firms?
Corporation tax and VAT
In what ways can a firm receive money from the government?
Grants, subsidies and the purchase of goods
What do households give to firms?
- Labour
- Expenditure
What do firms give to households?
- Wages
- Products and services
How do the government inject money back into households?
Through transfer payments
What is the problem with most models for the circular flow?
They only take into account the domestic flow of income
Where do households often store income, instead of putting it straight back into the circular flow?
The financial sector
What is it the responsibility of the financial sector to do?
Use savings to promote business investment
Why do some see the circular flow model as limited?
It excludes environmental economics
List the 3 injections of demand
- Exports
- Government spending
- Investment
List the three ways money can be withdrawn from the circular flow
- Imports
- Taxation
- Savings
