1.1 Circular Flow of Income

• Income: The money that comes into a household. For many, the main source of income is wages.
• Circular flow of income: economic model that pictures income as flowing continuously between businesses and households i.e. the way in which income, money, goods and services flow in an economy.
• National income: A measurement of all the incomes that flow to households over a period of time.
• National output: Value of all the output (goods and services) produced in an economy over a period of time.
• National expenditure:

  The value of spending by households, firms and government over a period of time.
• Injections:

  Routes for money to enter the circular flow of income. It includes investment, government expenditure and exports.
• Leakages

  Routes for money to leave the circular flow of income. It includes savings, taxation and imports.