2.4 National Income

Question 1

Describe the circular flow of income.

Answer 1

Households receive income, then buy goods from firms,businesses then buy land, labour and capital then buy wages and rent. The government takes a % in taxes from the businesses and households to pay for public services and the public sector. Uk buys imports from overseas and other countries buy uk exports.

Question 2

What do imports and exports cause in the circular flow of income?

Answer 2

Imports - Leakage
Exports - Injection

Question 3

What is income?

Answer 3

Income is a flow of money.

Question 4

Give some examples of income.

Answer 4

-Wages and salaries from jobs
-Rental income from property
-Interest from savings
-Profits flowing to shareholders

Question 5

What is original income?

Answer 5

Income from jobs, private pensions & interest from savings.

Question 6

What is gross income?

Answer 6

Original income + cash (welfare) benefits.

Question 7

What is disposable income?

Answer 7

Gross income - direct taxes.

Question 8

What is post-tax income?

Answer 8

Disposable income - indirect tax

Question 9

What is the definition of wealth?

Answer 9

Wealth is the value of a stock of assets owned by someone or society as a whole.

Question 10

Give some examples of wealth.

Answer 10

-Savings in bank accounts
-Ownership of property
-Shares / stocks in businesses