Understanding Circular Flow of Income

Front

Explain the circular flow of income in a closed economy with no government. Which of the following best describes the flow of income between households and firms?

Back

Households provide factors of production to firms and receive income in return.

Front

Identify the four factors of production and their respective payments: Land, Labor, Capital, Entrepreneurship.

Back

Land - Rent, Labor - Wages, Capital - Interest, Entrepreneurship - Profit

Front

In the circular flow model, the income flow is numerically equivalent to which of the following? The value of imports, The expenditure flow and the value of output flow, The value of exports, The value of government spending

Back

The expenditure flow and the value of output flow

Front

In an open economy with government and financial markets, which of the following are considered leakages/withdrawals? Options: Savings, taxes, import expenditure, Government expenditure, taxes, import expenditure, Investment, government expenditure, export revenue, Savings, investment, export revenue

Back

Savings, taxes, import expenditure

Front

How does the size of the circular flow change depending on the relative size of injections and leakages?

Back

The circular flow increases if injections are greater than leakages.

Front

What is the main difference between GDP and GNP/GNI as measures of economic activity?

Back

GNP/GNI includes income from abroad, while GDP does not.

Front

What distinguishes the nominal value of GDP from the real value of GDP?

Back

Real GDP is adjusted for inflation, while nominal GDP is not.

Front

How does total GDP differ from per capita GDP?

Back

Per capita GDP measures the average income per person, while total GDP measures the total income of a country.

Front

Which approach to measuring national income involves summing up all expenditures in an economy?

Back

The expenditure approach

Front

What is "green GDP" and why is it significant?

Back

Green GDP accounts for environmental destruction in GDP calculations.