Circular Flow of Income Quick Quiz. What are the 3 injections to an economy? Investment Government spending Exports.

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Presentation transcript:

Circular Flow of Income Quick Quiz

What are the 3 injections to an economy? Investment Government spending Exports

What do financial markets do? Accept savings from households Offer this ‘cash’ to businesses as investments loans Charge businesses interest for loans Give ‘savers’ interest in return for their money The difference between interest charged and interest given = banks profit…!

What are the 3 ways of measuring NI? National Income = all incomes from FoP are added National Product = all g & s produced National Expenditure (AD) = all expenditure on output is added.

What’s the difference between GDP & GNP? GNP = GDP + Net property income from abroad NPIA is the net balance of interest, profits and dividends (IPD) coming into the UK from UK assets owned overseas matched against the flow of profits and other income from foreign owned assets located within the UK.

Is the UK’s GDP higher or lower than GNP? GDP is lower than GNP in UK

How can GDP be higher than GNP? Where net recipients of overseas investment is negative i.e. foreign businesses located in the economy generate more income than ‘that economies’ businesses located abroad.

What’s the difference between nominal and real? Nominal is current prices Real takes into account inflation (subtracts increases in prices)