Topic 3 - Circular Flow Of Income Macro Flashcards
1
Q
What is circular flow of income?
A
A simple model of the economy that shows how money, goods and factors of production move between two sectors: households and companies
2
Q
Injections and leakages
A
Injections:
Government spending
Exports
Investment
Leakages:
Tax
Imports
Savings
3
Q
Circular flow of income diagram
A
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.