Topic 3 - Circular Flow Of Income Macro

Question 1

What is circular flow of income?

Answer 1

A simple model of the economy that shows how money, goods and factors of production move between two sectors: households and companies

Question 2

Injections and leakages

Answer 2

Injections:
Government spending
Exports
Investment

Leakages:
Tax
Imports
Savings

Question 3

Circular flow of income diagram

Answer 3

There is a flow of income going in one direction and expenditures on goods, services and resources going in the opposite direction. Households buy goods and services from businesses and buy resources from households.