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12 Cards in this Set
- Front
- Back
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How do you measure national income? |
income=output=expenditure |
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What is meant by the circular flow in income? |
The flow/movement of money with an economy between households and firms |
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What is meant by an injection? |
-exports -investment -government spending -there’s go directly to firms -money enters economy |
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What is meant by a withdrawal? |
-imports -savings -taxes -Can be made by households or firms -It is withdrawal as money is saving income removes it from circular flow-money leaves economy |
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What is the difference between physical and monetary flows? |
-A physical flow is the flow of a good or service such as electricity. -A monetary flow is the flow of money, which could be in the form of taxes |
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What is meant by the average propensity to consume? |
Percentage of income spent rather than saved. It is calculated by total consumption divided by total income. |
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What is meant by the marginal propensity to consume? |
-Measures the proportion of extra income that is spent on consumption. -For example, if an individual gains an extra £10, and spends £7.50, then the marginal propensity to consume will be £7.5/10 = 0.75. -change in consumption/change in disposable income |
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What is meant by the average propensity to save? |
Income that is not spent. This is also known as the savings ratio. |
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What is meant by marginal propensity to save? |
Amount of extra income that is saved. Change in savings/ change in income |
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What is meant by marginal propensity to withdraw? |
MPW=MPS+MPT+MPM Marginal propensity to withdraw = marginal propensity to save + marginal propensity to tax (proportion of each pound taxed by the government)+ marginal propensity to import (spending income on imports rather than domestic goods) |
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What is meant by the multiplier? |
Initial injection into the economy causes a bigger final increase in national income. This leads to more jobs being created, higher average incomes, more spending, and eventually, more income is created. |
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What is the role and purpose of the multiplier? |
COME BACK TO THIS |
