MACRO; Circular Flow of Income
- Created by: HannahBurston
- Created on: 01-02-16 21:59
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- Circular Flow of Income
- Closed Economy
- Firms produce goods and services; national output
- Goods and service represent the physical flow i.e. 'real things'
- Households provide factors of production and in return receive money; national income
- National output = national income = national expenditure
- households spend income on goods and services; national expenditure
- money represents the monetary flow i.e. money that pays for physical things
- households spend income on goods and services; national expenditure
- money represents the monetary flow i.e. money that pays for physical things
- Households provide factors of production and in return receive money; national income
- National output = national income = national expenditure
- Firms produce goods and services; national output
- Open Economy
- INJECTIONS
- Government Spending
- Investments
- Exports
- Equilibrium occurs when leakages = injections
- LEAKAGES
- Taxation
- Savings
- Imports
- Equilibrium occurs when leakages = injections
- Injection > Leakages
- Means expenditure > output
- Firms will increase output
- National income, output and expenditure will also increase
- Injections < Leakages
- Means output > expenditure
- national income, output and expenditure will also decrease
- Firms will reduce output
- INJECTIONS
- Closed Economy
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