the circular flow of income
what is the circular flow of income
a diagram that shows how money moves around the economy between households and firms
what are the three injections into the circular flow of income
exports,investment,government grants
what are the three leakages/withdrawals in the circular flow of income
taxes,exports,savings
how does money travel from households to firms
buying goods and services
how does money travel from firms to households
wages
how often are there injections/withdrawals to the circular flow of income
always
whatis the correlation between the movement of money and the economy
the faster money moves around the economy, the faster the economy grows
what would happen if the government increased their spending
boost the amount of economic growth
what is investment
spending by businesses
what woiuld an increase in investment do to the economy
boost economic growth
what will an increase in exports do to the economy
additional money comes into the economy, which will cause economic growth
what impact does tax have on the CFoE
individuals will have less money to spend in the economy, which would reduce economic growth
what is savings
the part of a persons income that is spent
what impact does savings have on the CFoE
if people choose to save more of their money, money will not be spent, so the rate of economic growth will decrease
what impact does imports have on the CFoE
moeny will leave the country so there is a reduction in economic growth
what are the four stages of the economic cycle
boom recession depression recovery
are there high or low levels of unemployment in a boom
low
are there high or low levels of unemployement in a recession
high
are there high or low levels of inflation in a boom
high
are there high or low levels of inflation in a recession
low
are there high or low levels of consumer confidence in a boom
high
are there high or low levels of consumer confidence in a recession
low
are there high or low levels of business confidence in a boom
high
are there high or low levels of business confidence in a recession
low
is the government budget position high or low in a boom
high
is the government budget position high or low in a recession
lower
is the balance of payments on current accounts high or low in a boom
low
is the balance of payments on current accounts high or low in a recession
low
is investment high or low during a boom
high
is investment high or low during a reccession
low
will interest rates be high or low during a boom
high
will interest rates be high or low during a recession
low
why do booms eventually end and turn into recession
high levels of demand mean high levels of inflation which will cause real incomes to fall and a fall in demand which results in a recession
why does a recession end and turn into a recovery
when organisations like the bank of england lowers interest rate in order to increase consume spending