Circular Flow Of Income Flashcards
(15 cards)
What is the circular flow of income?
The way which income, money, goods and services flow in an economy
How is the size of the economy measured?
> National income
National output
National expenditure
What is National income?
The measurement of all the income that flow to households over a period of time
What is National output?
The measurement of the value of all output (goods and services) produced in an economy over a period of time
What is National expenditure?
The measurement of all the spending by household, firms and government over a period of time
What are injections?
Routes for money to enter the circular flow of income
What are the injections
> investment
government expenditure
exports
What is investment?
When firms purchase goods and services to be used in future production
What is government expenditure?
When government purchases goods and services
What are exports?
When firms sell goods and service abroad- money leave the foreign economy and is injected into the economy in which the firm operates
What are leakages?
Routes for money to leave the circular flow of income
What are the leakages?
> Savings
Taxation
Imports
What is saving?
When households choose to save their money instead of spending it
What is taxation?
When government takes money out of the circular flow
What are imports?
When households and firms buy from foreign firms, the money leaves the economy in which the firm operates and is injected into the foreign economy
