Macroeconomics 1.1 Circular Flow of Income

Question 1

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Circular Flow

Answer 1

Way in which income, money, goods and services flow in an economy.

Question 2

National Income

Answer 2

All the incomes that flow to households over a period of time

Question 3

National Output

Answer 3

Value of all the output of goods and services produced in an economy over a period of time

Question 4

National expenditure

Answer 4

All the spending by households, firms and government over a period of time.

Question 5

Injections

Answer 5

Routes for money to enter the circular flow of income- investment, government expenditure and exports

Question 6

Leakages

Answer 6

Routes for money to leave the circular flow of income -savings, taxation and imports

Question 7

Investment

Answer 7

When firms purchase goods and services which are used to make other goods and services (capital stock)

Question 8

Government expenditure

Answer 8

When the government purchases goods and services

Question 9

Exports

Answer 9

When firms sell goods and services abroad- the money paid comes back into the (UK) economy

Question 10

Savings

Answer 10

When households choose to save money instead of spending it

Question 11

Taxation

Answer 11

when the government takes money out of the circular flow

Question 12

Imports

Answer 12

when households and firms buy from foreign firms so money leave the (UK) economy as income to those abroad.