Circular Flow of Income Flashcards
(12 cards)
1
Q
What is an economy made up off?
A
Firms and households
2
Q
What is the circular flow of income?
A
National Output = National Income = National Expenditure
3
Q
How does a basic circulator flow of income work?
A
Firms produce goods and services and consume land labour capital and households vice versa
4
Q
What does a detailed circular flow of income include?
A
Injections and withdrawals
5
Q
How do injections work?
A
Affect firms
6
Q
How do withdrawals work?
A
Afffect firms and households
7
Q
What are leakages?
A
Imports
Savings
Taxes
8
Q
What are injections?
A
Exports
Investment
Gov spending
9
Q
Why do injections lead to larger change to national income?
A
Multiplier effect
10
Q
What is households to firms called?
A
National expenditure
11
Q
What is firms to households called?
A
Income
12
Q
What is wealth?
A
Total value of assets
