National income 2.4.1 unit 28

Question 1

What is the circular flow of income?

Answer 1

It is a model of the economy which shows the flow of goods, services and factors and their payments around the economy.

Question 2

What is a closed economy?

Answer 2

It is an economy where there is no foreign trade.

Question 3

What are is income?

Answer 3

Rent, interest, wages and profits earned from wealth owned by economic actors.

Question 4

What are injections into the circular flow?

Answer 4

Is spending which is not generated by households including investment, government spending and exports.

Question 5

What is national income?

Answer 5

Is the value of the output, expenditure or income of an economy over a period of time.

Question 6

What is an open economy?

Answer 6

Is an economy where there is trade with other countries.

Question 7

What is wealth?

Answer 7

Is a stock of assets which can be used to generate a flow of production or income. For example, physical wealth such as factories and machines is used to make goods and services.

Question 8

What are leakages?

Answer 8

Some leakages are:-

• savings
• taxes
• imports