reece circular flow of income

Nikolas Reece
Flashcards by Nikolas Reece, updated more than 1 year ago
Nikolas Reece
Created by Nikolas Reece almost 5 years ago


2016 CSEC Economics (Section 5 - Financial Sector) Flashcards on reece circular flow of income, created by Nikolas Reece on 04/27/2016.

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The circular flow of income an economic model depicting the movement of income between the different sectors within the economy
factor services the services provided by households to firms in the form of land, labour, capital and entrepreneurship.
factor income the rewards earned or payment for factor services including rent, interest, income and profit.
money (income flow) Money paid for factor service and for goods and services purchased.
real flow The flow or movement of goods and services and factor services.
leakage or withdrawals when the flow of income is redirected or ‘leaks’ towards another sector external to firms and households
leakages or withdrawals from the 3 sectors gov't - taxes (T) int'l - import spending (M) financial - savings (S)
injections additions or ‘inflows’ to the CFI from the other three sectors
injections from the three sectors financial - investment (I) govt - govt spending (G) Int'l - export revenue (X)
taxes compulsory fines levied by the government on individuals and firms
savings Income that is set aside for future use
5 factors affecting the level of savings in an economy Interest rates Range of financial product Size of real disposable income: Rate of inflation Confidence in the economy
investment the purchase of capital goods that are used in the future to create wealth.
circular flow of income diagram
importance of the circular flow of income gives a clear-cut picture of how the economy works and it also measures the size of the economy
financial intermediary mobilizing and making loanable funds available from savers to borrowers for consumption and investment purposes
financial services services that relate to the trade or transaction of money, securities and other financial instruments
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