The Circular Flow of Income Flashcards
What is national income?
The total value of the goods and services a country produces in one year
How can national income be measured?
GDP, GNP, GNI
What is real GDP?
The value of GDP adjusted for inflation
What is nominal GDP?
The value of GDP without being adjusted for inflation. It is misleading as it can GDP appear higher than it really is.
What is GNP?
The market value of all products produced in an annum by the labour and property supplied by the citizens of 1 country. It includes GDP + income earned from overseas assets, but removes income earned from overseas residents
What is the difference between GNP and GDP?
GDP is within a countries border, but GNP includes products produced by citizens overseas
What is GNI?
The sum value added by all producers who reside in a nation, as well as product taxes and receipts of primary income from abroad
Who are resources exchanged between in an economy?
Firms and households
What is the role of households in the economy?
They supply the factors of production and in return receive wages and dividends
What is the role of firms in the economy?
They supply goods and services to households
What is the circular flow of income?
The way money is cycled around the economy
What is a withdrawal from the circular flow of income?
Money removed from the circular flow of income from taxes, saving and imports
What are injections into the circular flow of income?
Money which enters the economy through government spending, investments and imports
What are exports?
An injection into the economy as revenue is earned from selling goods and services to foreign countries
What are imports?
A withdrawal from the economy as money leaves the country due to goods and services being bought from abroad
