Circular Flow Of Income

Question 1

What are all the types of injections

Answer 1

Exports (X), Government spending (G) and investments (I)

Question 2

What are injections

Answer 2

An increase of expenditure into the circular flow of income, leading to an increase in AD.

Question 3

What are all the types of withdrawals

Answer 3

Saving (S), Imports (M) and Taxations (T)

Question 4

What are withdrawals

Answer 4

A reduction of money in the circular flow, sometimes known as leakages.

Question 5

What is the circular flow of income?

Answer 5

It shows how money flows from households to firms. Then firms pay household wages to produce goods.

Question 6

What is real income

Answer 6

The value of GDP adjusted for inflation (shows the actual value for goods and services)

Question 7

What happens if there was a rise in injections

Answer 7

There would be a rise in AD, and if there is spare capacity in the economy, an increase in injections would lead to higher economic growth.