the circular flow of income

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Economic models
used to show the essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes of variables.
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Recession
when an economy is growing at less than its long term trend rate of growth
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Balance of payments
exports minus imports - a deficit means more is imported than exported
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flow
measured over a period of time
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stock
a quantity measured at a particular point in time
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injections
money that originates outside the circular flow and so will increase national income/ output/ expenditure e.g. investment for firms
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withdrawals
any money not passed on in the circular flow and has the effect of reducing national income/ output/ expenditure e.g. savings
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Investment
spending by firms on buildings, machinery and improving the skills of the labour force
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savings
a withdrawal from the circular flow of income
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income induced
increases as income increases and decreases as income decreases e.g. savings
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multiplier effect
where an increase or decrease in spending leads to a larger than proportionate change in national income
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net government spending
the difference between government spending and taxation
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fiscal policy
the policy of the government regarding taxation and govt. expenditure
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disposable income
income available to households after the payment of income tax and national insurance contribution
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Card 2

Front

when an economy is growing at less than its long term trend rate of growth

Back

Recession

Card 3

Front

exports minus imports - a deficit means more is imported than exported

Back

Preview of the back of card 3

Card 4

Front

measured over a period of time

Back

Preview of the back of card 4

Card 5

Front

a quantity measured at a particular point in time

Back

Preview of the back of card 5
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