2.4

• Label the circular flow of income

  A) Factors of production

  B) Goods and services

  C) Income

  D) Spending

  E) Investment

  F) Government Spending

  G) Exports

  H) Saving

  I) Tax

  J) Imports

  
• What is meant by circular flow of income?

  A way of analysing the flows of money around an economy between households and firms, it also accounts for injections and withdrawals from the c.f.o.i
• Define multiplier effect

  describes the process by which a change in an injection causes a more than propionate change in nation income
• Equations of multiplier

  1/1-MPC and 1/MPW
• What is meant by the marginal propensity to consume?

  refers to the proportion of an increase in income that is spent
• What is meant by the marginal propensity to save?

  refers to the proportion of an increase in income that is saved
• What is meant by the marginal propensity to tax?

  refers to the proportion of an increase in income that is taxed
• What is meant by the marginal propensity to import?

  refers to the proportion of an increase in income that is imported
• What is meant by the marginal propensity to withdraw

  refers to the proportion of an income that is withdrawn
• Define National Income


  The total value of goods and services produced by an economy in a given period of time