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Description
Flashcards by Nikolas Reece, updated more than 1 year ago
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Created by Nikolas Reece
over 8 years ago
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| Question | Answer |
| The circular flow of income | an economic model depicting the movement of income between the different sectors within the economy |
| factor services | the services provided by households to firms in the form of land, labour, capital and entrepreneurship. |
| factor income | the rewards earned or payment for factor services including rent, interest, income and profit. |
| money (income flow) | Money paid for factor service and for goods and services purchased. |
| real flow | The flow or movement of goods and services and factor services. |
| leakage or withdrawals | when the flow of income is redirected or ‘leaks’ towards another sector external to firms and households |
| leakages or withdrawals from the 3 sectors | gov't - taxes (T) int'l - import spending (M) financial - savings (S) |
| injections | additions or ‘inflows’ to the CFI from the other three sectors |
| injections from the three sectors | financial - investment (I) govt - govt spending (G) Int'l - export revenue (X) |
| taxes | compulsory fines levied by the government on individuals and firms |
| savings | Income that is set aside for future use |
| 5 factors affecting the level of savings in an economy | Interest rates Range of financial product Size of real disposable income: Rate of inflation Confidence in the economy |
| investment | the purchase of capital goods that are used in the future to create wealth. |
| circular flow of income diagram | |
| importance of the circular flow of income | gives a clear-cut picture of how the economy works and it also measures the size of the economy |
| financial intermediary | mobilizing and making loanable funds available from savers to borrowers for consumption and investment purposes |
| financial services | services that relate to the trade or transaction of money, securities and other financial instruments |
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