circular flow n Quantitative elements Gr11 eco

What does the circular flow model demonstrate?

It demonstrates how money moves through society, flowing from producers to workers as wages and back to producers as payment for products.

What formula represents Gross Domestic Product (GDP)?

GDP = C + G + I + (X - M)

C= consumption expenditure

G= government expenditure

I= gross fixed capital formation

X= exports

M= imports.

What are the two main categories of goods produced in an economy?

Economic goods and services, which can be divided into final consumer goods and services, and capital (intermediate) goods and services.

What are final goods and services?

goods ready to be consumed

List the four types of durable and semi-durable goods.

1) Durable goods - such as houses, furniture, and cars; 2) Semi-durable - such as clothes and domestic appliances; 3) Non-durable - such as food, gas, and petrol; 4) Services - such as medical and financial services.

What is consumption expenditure (C)?

The total spending of households on final consumer goods and services, indicating how private households spend national income.

What is the significance of autonomous consumption?

minimum level of consumption = necessities (food housing and utilities)

How much does household consumption account for in the total spending of the economy?

Approximately 60% of total spending in the economy.

What does government final consumption expenditure represent in GDP?

It reflects how government uses its income to finance goods and services needed by the public sector.

What was the tax-to-GDP ratio for the fiscal year 2023/24?

24.5%, indicating the overall tax burden in relation to the GDP.

What are the three divisions of final government consumption expenditure?

Functional, Administrative, and Financial.

What is one primary role of government spending?

achieve public objectives and enhance social and economic well being of population

How does government spending influence economic growth?

It can stabilize the economy through fiscal policy.

What is capital formation?

The process of increasing the stock of capital in the economy.

Why is capital stock important for a country's economy?

It helps maintain and expand production capabilities.

What is the formula for GDP?

GDP = C + I + G + (X - M)

• C: Consumption
• I: Investment
• G: Government Spending
• X - M: Net Exports (Exports - Imports)

What is GVA?

Gross Value Added. It measures how much value a specific part of the economy (like a business or sector) adds.

What is the difference between GDP and GNP?

GNP = GDP + net property income from abroad.

What are injections in the economy?

Investment, government spending, and exports that add to the circular flow of income.

How does a deficit in the Current Account of the Balance of Payments occur?

When imports exceed exports.

What are merit goods and why are they important?

Goods that are essential for economic welfare, such as education and healthcare.

What does GNE measure?

The total value of spending on goods and services.

What is the significance of Gross National Income (GNI)?

It measures the total income earned by citizens of a country, regardless of their location.

What economic impact does increased capital formation have?

It can reduce unemployment and enhance the welfare of the labor force.

What does a favorable balance of trade indicate?

That a country’s exports exceed its imports.