Economics Introduction HNC

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Circular flow of income. Income, expenditure, firms and businesses are all part of the circular flow of income.


Government spending represented by the letter G are benefits, pensions, small business grants, improving roads, houses and hospitals.

Investments represented by the letter I are the purchase of long term goods, equipment, vehicles and buildings. This tends to come from businesses rather than households.

Exports represented by the letter X are sales made outside of the UK so the money comes into the UK flow from another countries flow.


Taxes represented by the letter T are funds taken out of the flow in the form of VAT or income tax.

Savings represented by the letter S are funds taken out of the flow by individuals or businesses to set aside for hard times.

Imports represented by the letter M are sales


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