National Income (NY)

Question 1

Circular flow of income

Answer 1

An economic model that shows flows of goods and services and factors of production between firms and households. The circular flow shows how national income or Gross Domestic Product is calculated.

Question 2

Income

Answer 2

Income represents a flow of earnings from using factors of production to generate an output of goods and services. For example, wages and salaries are a factor reward to labour and interest is the flow of income for the ownership of capital.

Question 3

Wealth

Answer 3

The value of a stock of assets such as housing, personal pensions, savings and many different forms of marketable (sellable) assets such as antiques.