National Income Flashcards
(6 cards)
1
Q
What does the Circular Flow of Income show?
A
It shows the movement of income and spending between households and firms.
2
Q
What are the Injections in the Circular Flow of Income?
A
Investment, government spending, exports.
3
Q
What are the Withdrawals (Leakages) in the Circular Flow of Income?
A
Savings, taxes, imports.
4
Q
What is the Multiplier Effect?
A
An initial increase in spending leads to a larger increase in national income.
5
Q
What is the formula for the Multiplier?
A
Multiplier = 1 / (1 - MPC)
Where MPC = Marginal Propensity to Consume.
6
Q
What is the relationship between National output, Expenditure, and Income?
A
National output = National expenditure = National income.
