Unit3: Circular Flow Of Income And Spending

Question 1

What does the circular flow of income show?

Answer 1

Shows the inputs , outputs and payments between households and firms within economy

Question 2

What does the circular flow of income capture

Answer 2

Macroeconomics activities

Question 3

What are 3 major flows in the economy?

Answer 3

Production
Income
Spending

Question 4

What does the production flow compromise of ?

Answer 4

It consist of the production of goods and services by firms . We look at the factors of Production: natural resources, labour , capital , entrepreneurship.

Question 5

What does the income flow comprise of ?

Answer 5

It consist of the flow of income to households. We look at wages and salaries, interest , rent and profit

Question 6

What does the spending flow entail?

Answer 6

It entails the spending be households on goods and services produced by firms. We look at households , firms , government and foreign sector