Theme 2 - National income and injections/leakages Flashcards
The circular flow of income
The movement of goods and services between household and firms over a given period of time
Wealth
The stock of assets that an individual owns
Income
A flow of renewables into a bank
What are the 3 Leakages
Savings, Imports, Taxations
What are the 3 injections
Exports, investment, government spending
What are the 3 ways of measuring level of economic activity
The national output, Value of goods and services and the national income
What is the formula for net-injections
Injections - withdrawals
What is an equilibrium
An equilibrium is when the number of injections within in the economy are equal to the number of withdrawals in the economy
What are the 4 factors of production:
Capital, Enterprise, Land, Labour
How do firms give back to the factors of production that households provide them
Capital (interest), Land (rent), Labour (wages), Expenditure (dividends).
What are the 3 measures of economics growth?
Output growth, expenditure growth and income growth
What is meant by output=expenditure=income
These are all measures of economic growth and because they all measure the same circular flow of income, the figures have to be the same so they are all equal
What is the multiplier and how can it be shown on a graph
When an initial injection in AD in an economy leads to a greater final output in an economy. The Keynesian LRAS graph can show the shifts to the right in AD from AD1 to AD2 to AD3. All these show inflationary pressure as P1 increase each time but Y1 increases each time to closer to YFE.
What is YFE and how does the multiplier affect it?
This is when an economy is working at full employment and there is a sustainable amount of factors of production being used in a given period of time. When there is a multiplier in an economy, this shifts AD right, closer to full employment.
