Th2.4: The Circular Flow of Income

Question 1

Households

Answer 1

own all wealth and resources to provide the firms land, labour and capital in return for rent, wages, interest and profit. they use this money to buy goods and services produced by firms

Question 2

Refer to PP

Look at Graph 2. What do the green arrows represent?

Answer 2

money, flowing in one direction

Question 3

Refer to PP

Look at Graph 2. What do the orange arrows represent?

Answer 3

goods services and factors of production, flowing in one direction

Question 4

What are the three ways of measuring the level of economic acticity?

Answer 4

national output
national expenditure
national income

Question 5

national expenditure =

Answer 5

national income = nation output

Question 6

Government

Answer 6

they take money out of the economy through taxation and add money by spending. if the government spends more than it takes away, it can increase the flow of income

Question 7

Financial services

Answer 7

inject money into the system through investment and take money away when consumers of producers save

Question 8

Foreign Markets

Answer 8

added as foreigners buy British goods so exports add money to the flow but British people want to buy foreign goods so imports take money away from the flow

Question 9

Balance of trade

Answer 9

difference between imports and exports

Question 10

Draw the circular flow of income

Answer 10

actually do it pls