Circular flow Flashcards
What is the circular flow of income?
Is the flow of income between households and firms in an economy over a given period of time.Househoulds provide firms with productive resources in exchange for income.In turn households buy the output produced by firms hence providing them with income.
What are leakages?
Leakages are flows of income out of the circular flow.These include saving,taxation and imports
What is saving?
Part of income not spent
What is taxation?
total tax revenue taken from firms and househoulds.Flow of income from households to the government
What are imports?
Total spending by domestic buyers on goods and services produced in foreign economies.
What are injections?
Injections are flows of income in to the circular flow.This involves gov spending,exports and investment.
What is investment?
Acquisition of capital goods by firms
What are. exports?
Total Spending on domestically produced goods and services by foreign firms and households
What is gov spending?
Total spending on gooods and services by the government.
How to measure GDP
C+I+G+(X-M),primary sector output +secondary sector + tertiary-stock appreciation.Both income and output minus stock appreciation
