Circular flow of income model

Which of the following is NOT one of the five sectors included in the cicular flow of income model?

• Individuals

• Financial Institutions

• International flows

• Businesses

• Entrepreneurs

What do individuals receive in return for supplying factors of production to businesses?

• Rent

• Wages

• Profit

• Interest

• Food

What are the two choices that individuals have when they receive income rewards, according to the model?

• Spend it

• Donate it

• Save it

• Return it

Without individuals, businesses would not exist. WHY?

• Because individuals supply the factors of production, such as labour and capital

• Because individuals purchase the products that businesses produce

• Because businesses couldn't borrow money without them

• Because governments rely on individuals to vote for them

Why are exports classified as 'injections'?

• Because exports can achieve disequilibrium via a slowdown in economic activity

• Because exports slow business activity

• Because exports increase the amount of money circulating in the economy as the payments come into the country

• Because exports decrease the amount of money circulating in the economy

How can equilibrium be restored if government expenditure increases?

• By lowering taxation

• By increasing the levels of imports

• By individuals increasing savings

• By government increasing taxation

Whenever total leakages are greater than total injections there will be a downturn

in the level of economic activity, with falling incomes, falling production and _____

unemployment.

Whenever total injections are greater than total leakages there will be an _____ in

the level of economic activity,

How does an economy return to equilibrium after it goes through a growth phase?

• The economy will not return to equilibrium

• total leakages from the economy will also fall as consumers have less income to save ,

  to spend on imports or to have collected as taxes.

• People with higher incomes save more and spend more on imports, which raises leakages up to equilibrium

• People with lower incomes save less and spend less on imports, which lowers leakages up to equilibrium

Import means

• buying goods from another country
• selling goods to another country
• only making one kind of product