CIRCULAR FLOW OF INCOME

What do we mean by the circular flow of the economy?

1. ) Read the definition from the site ( copy the link in another window)

http://tutor2u.net/economics/gcse/revision_notes/big_picture_circular_flow_of_income.htm


After reading the definition answer the following questions in a one whole sheet of paper. ( Send your answers to asledv07@gmail.com)

1. In the circular flow, how does business investment add to the flow?
2. How will government spending contribute to the circular flow of money?
3. How are exportation activities helpful to the flow of money in the economy?
4. Why does it consider savings, taxes and imports a MINUS to the flow of money in the economy?

2.) Analyze the images shown in the site below:

http://">http://www.fgn.unisg.ch/eurmacro/tutor/circularflow_movie.html

3. ) Answer the questions related to Circular Flow below:

a. What is the first key player in the economy?
b. What are the inputs to firms? Outputs? (based on the movie)
c. What is the second key player? Inputs and outputs?
d. How are firms and households connected?
e. What are the two circles shown in the macro-economic flow?
f. How do economists measure transactions in the economy?
g. What is income? Spending?

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=tst

Select test: Circular Flow then click retrieve test
Answer the test.