ECON112 - ch3: Production income and spending in the mixed economy

Stock variable

measured at a specific point in time

Flow variable

measured over a period of time

What are the primary factors of production

natural resources and labour

what are the secondary factors of production

capital and entrepreneurship

examples of stock variables

wealth, assets, unemployment

examples of flow variables

income, investment, loss

difference between stock and flow

stocks can only change as a result of flows

what does capital comprise of

all manufactured goods (machinery, buildings)

how can total income be increased?

by increasing total production

Aggregate consumption expenditure

total spending of all households on consumer goods and services

what is the source of income for natural resources

rent

what is the source of income for labour

wages and salaries

what is the source of income for capital

interest

what is the source of income for entrepreneurship

profit

what is spending by households called

consumer spending (C)

what does government supply to firms and houseolds

public goods and services

what is the government’s expenditure?

government spending (G)

where is the government’s income generated from?

taxes paid by households and firms (T)

leakages

when money is taken out of the economy

injection

when money in being inserted into the economy

what are the leakages and injections from the foreign sector

exports are injections and imports and leakages

what’s the formula for total spending

Total spending =C+I+G+X-Z

what is production generated by?

factors of production

what do factors of production earn

income

by whom is spending done?

households, firms, the government, and the foreign sector

name figure 3-8 (the overall picture)

major elements of the circular flow of income and spending