The circular flow of income

 Define Macroeconomics

the study of the interrelationships between economic variables at an aggregate (macroeconomic) level

What do you think income is? Where do people get their income from?

 Wages/salary from work.      Rental incomes to private landlords.     Interest on savings.    Dividends on shares

Income is the ongoing  flow of money that is derived from ownership of skills and wealth

factors of production

land

labour

enterprise

capital

what is the reward from the factors of production

land is rent

labour is wages/salary

capital is interest

enterpise is profit

What is the difference between income and wealth?

income is the flow concept that your earning at that time

Wealth is a stock concept that what you own and what Ur assets are valued at

what is an economy

the large set of inter-related production consumption and exchange activities that aid in determining how scarce resources are allocated in a country or for a free period of time

Who are the main economic agents? What types of decisions do they make?

The government, consumers/households, firms, bank of England

make decisions to maximize their own objectives—typically utility for households and profits for firms—within their respective constraints, acting as key decision-makers in the economy.

draw the circular flow of income

what does the circular flow of income show

the fundamental relationships between households and firms in an economy, illustrating how money flows as income and expenditure for goods, services, and factors of production (like labor)

What do firms provide to households?

Goods and services and factor incomes

What do households provide to firms?

Factors of production and consumer expenditure

What are the factors of production?

Land labour capital (not needed but enterprise)

What are the factor incomes?

Wages, rent, interest and profit

What are the 3 injections?

Investments, government spending and exports

 What are the 3 withdrawals/leakages?

Savings taxation and imports

Spot the difference between the simple and complex models of the circular flow.

the number of economic sectors they include.The simple model represents a closed, two-sector economy with only households and firms, while the complex model expands to include the government, financial institutions, and foreign trade. 

Define each injection and withdrawal

investment are money put into firms, government spending are government projects, exports are money gained from sending products abroad, savings are money earned from interest, taxes are how much more you pay when buying smth, imports are money spent brining stuff into the uk

examples of withdrawals

Savings (S), Taxes (T), Imports (M)

examples of injections

 Investment (I), Government Spending (G), Exports (X)