A-Level - Circular Flow of Income

Which combination of changes would increase GDP?

• A

• B

• C

• D

What is an injection (in circular flow of income)?

• A. extra saving that arises from higher incomes

• B. extra spending that enters the circular flow

• C. payments to factors of production

• D. spending that is withdrawn from the circular flow

Which of the following is not an injection into the circular flow?

• A. exports

• B. government spending

• C. imports

• D. investment

What is meant by leakages from the circular flow of income?

• A. income that is not spent on domestically produced goods and services

• B. income that is spent on capital goods rather than on consumer goods

• C. products that are produced by the government

• D. products that are sold to other countries

What is a leakage from the circular flow of Mauritius?

• A. income earned by Mauritian firms for selling goods and services to Mauritian consumers

• B. income earned by Mauritian people working for Chinese multinational companies producing in Mauritius

• C. spending by the government of Mauritius on computers for the country’s schools

• D. spending by Mauritian firms on capital goods from France

Who buys goods and services in an open economy?

• A. households

• B. households and firms

• C. households, firms and the government

• D. households, firms, the government and foreigners

Which is a combination of two flows from households to firms?

• A. factor payments and products

• B. factor payments and spending on products

• C. factor services and products

• D. factor services and spending on products

Which of the following changes would increase the income flowing round the Indonesian economy?

• A. a decrease in spending by Indonesian firms on capital goods

• B. a decrease in the tax the Indonesian government imposes on income

• C. an increase in goods Indonesian firms buy from China

• D. an increase in saving by Indonesian households

When is an open economy in equilibrium?

• A. when investment equals saving

• B. when investment plus exports equals saving plus imports

• C. when investment plus government spending equals saving plus taxation

• D. when investment plus government spending plus exports equals saving plus taxation plus imports

An economy is in equilibrium with a GDP of $520bn.

Its exports are $60bn, government spending $90bn, imports $50bn, saving $65bn and taxation $75bn.

What is the value of investment?

• A. $30bn

• B. $40bn

• C. $180bn

• D. $330bn