National Income

Question 1

What is the circular flow of income?

Answer 1

shows how money moves through an economy in a constant loop from producers to consumers and back again

Question 2

What is the difference between income and wealth?

Answer 2

Wealth is the value of assets you own, like money and property. Income is the amount you make in a certain period, like your salary

Question 3

What is the opportunity cost of accumulating wealth?

Answer 3

once you spend a resource on something, you can’t spend it on anything else

Question 4

What is the wealth effect?

Answer 4

The wealth effect is a behavioral economic theory suggesting that consumers spend more when their wealth increases, even if their income does not

Question 5

What is the opportunity cost?

Answer 5

the value of the next best alternative that we could have chosen but didn’t