- Describe, using a diagram, the circular flow of income between households and firms in a closed economy with no government.
- Identify the four factors of production and their respective payments (rent, wages, interest and profit) and explain that these constitute the income flow in the model.
- Outline that the income flow is numerically equivalent to the expenditure flow and the value of output flow.
- Describe, using a diagram, the circular flow of income in an open economy with government and financial markets, referring to leakages/withdrawals (savings, taxes and import expenditure) and injections (investment, government expenditure and export revenue).
- Explain how the size of the circular flow will change depending on the relative size of injections and leakages.
Today we start Macroeconomics.... let's start with an EconMovie to show how an economy works.
We will then build up a model of the economy on the board and you will be given a worksheet to complete.
Check out this physical model of the circular flow as well... the Moniac Machine