2.4.1 + 2.4.2 National income, Injections and Withdrawals

Question 1

what is income?

Answer 1

measures the flow of money a person or economy recieves each year

payslip/rent

Question 2

what is wealth?

Answer 2

the sum/stock of all your assets added up

assets are items that you own

Question 3

what are some examples of income?

Answer 3

• salary
• intrest on savings
• dividends
• unemployment benefits
• rental income

things that you recive on a daily basis

Question 4

what are some examples of using wealth to generate income?

Answer 4

• dividend payments from shares
• intrest payments on savings
• rental income from mahcinary

Question 5

draw the simple circlular flow model
(What is an assumption of this model)

Answer 5

• assumed that all factors of production are owned by households
• factors of income: rent & wages

Question 6

why does national output=national expenditure=national income?

Answer 6

1. the spending from households come from the income that they earn
2. and expendiyure = ouput as households spend on the output of goods and services

Question 7

what is the circular flow equation?

Answer 7

national income= national expenditure= national output

Question 8

what is the defeinition of factor incomes in the circular flow of income?

Answer 8

money paid by firms to households in return for factors of production

Question 9

how could national income be measured?

Answer 9

• measuring national output, becuase national output= national income
• using real GDP

Question 10

what are the withdrawals/leakages in the circular flow ?

Answer 10

things that stop the circulat flow of income (households spending all their income on firms)
* savings
* imports
* taxes

SIT

Question 11

what is a leakage?

Answer 11

when money leaks out of the circular flow

Question 12

what are savings within the circulr flow of income?

Answer 12

disposable income that is not spent by households (leakage)

Question 13

what are imports in the circulat flow of income?

Answer 13

spending on foreign goods and services

Question 14

what are taxes within the circular flow of income?

Answer 14

money paid to the goverment by consumers, firms, workers (leakages)

Question 15

what is an injection?

Answer 15

when money is injected into the circular flow

Question 16

what are the types of injections in the circular flow of income?

Answer 16

• goverment spending
• investment
• export

GIX

Question 17

What is goverment spending within the circulr flow of income?

Answer 17

when the goverment injects money into the economy by spending on schools, teachers, hospitals, doctors….

Question 18

what are exports iwthin the icrcular flow of income?

Answer 18

when firms export goods abroad, we recive money to money is injected into the economy

Question 19

what is investment within the circular flow of income?

Answer 19

banks use our savings to invest into our firms, injecting money into the circular flow

Question 20

draw the more complex circular flow of income model.

Answer 20

Question 21

how do changes in injections and withdrawals affect the economy?

Answer 21

• leakages < injections, money coming into economy, GDP increasing
• leakages > injections money leaving the economy, GDP decreasing
• leakages= injections, same amount of money in economy, GDP stays the same

Question 22

what is another formula for real GDP?

Answer 22

GIX- SIT

Question 23

wealth

Answer 23

a stock of assets

Question 24

define injections

Answer 24

variables in an economy that add to the circular flow of income. They include: investment(I), goverment spending (G) and exports (X)

Question 25

define withdrawals

Answer 25

variables in an economy that remove money flows from the circular flow of income. Saving (S), Imports(I), taxes(T)

Question 26

define national income

Answer 26

the total spending on goods and services in an economy

Question 27

define 'circular flow of income'

Answer 27

an economic model that shows how money flows around the economy between firms and households. * consumption (spending) and income flows as financial flows for factors of production and goods and services